In: Economics
Assume that you just hit the
$9
million jackpot in a lottery, which promises you a payment of
$3
million for the next three years. Since we've established that the jackpot will not be worth
$9
million in today's dollars, how much is it worth if the interest rate is
12
percent? (Hint: the first payment is made immediately.)
$nothing
million
Solution:-
Present worth ($ Million) = Equal payment x P/A(r%, N) x (1 + r)#
= 3 x P/A (12%, 3) x 1.12
= 3 x 2.4018** x 1.12
= $8.07 Million