Calculating Present Values [LO2] You have just received notification that you have won the $2 million first prize in the Centennial Lottery.

Calculating Present Values [LO2] You have just received notification that you have won the $2 million first prize in the Centennial Lottery. However, the prize will be awarded on your 100th birthday (assuming you’re around to collect), 80 years from now. What is the present value of your windfall if the appropriate discount rate is 8.4 percent?

Solutions

Expert Solution

Present value = future value/(1+discount rate)^no of years

= 2000000/(1.084)^80 = 3152.73

So present value of windfall is 3152.73

jeff jeffy answered 2 years ago

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