You just won the 1 million dollar lottery! However the state will be paying it out...

You just won the 1 million dollar lottery! However the state will be paying it out to you in 20 annual $50,000 payments. If the inflation rate averages 4% over that time period how much would be the present value if you could receive an equivalent amount up front in a lump sum.

Expert Solution

Present value= A(PVAF i%, n)

Where A= annual amount (given as $50,000), i= inflation rate (given as 4%) and n= period (number of years given as 20)

Present value= $50,000*(PVAF 4%,20)

= $50,000* 13.590326 = $679,516.32

jeff jeffy answered 2 years ago

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