Ronald Wilson has won a million dollars in the state lottery that will pay him 20...

Ronald Wilson has won a million dollars in the state lottery that will pay him 20 annual installments of $50000. He will get the first installment right now. Using a discount rate of 10% per year, Calculate the present worth of lottery

Expert Solution

	Amount recive every year	Present Value Of the Amount (formula)	Present Value Of the Amount
Yr 1	$ 50,000.00	50000/(1+10%)^0	$ 50,000.00
Yr 2	$ 50,000.00	50000/(1+10%)^1	$ 45,454.55
Yr 3	$ 50,000.00	50000/(1+10%)^2	$ 41,322.31
Yr 4	$ 50,000.00	50000/(1+10%)^3	$ 37,565.74
Yr 5	$ 50,000.00	50000/(1+10%)^4	$ 34,150.67
Yr 6	$ 50,000.00	50000/(1+10%)^5	$ 31,046.07
Yr 7	$ 50,000.00	50000/(1+10%)^6	$ 28,223.70
Yr 8	$ 50,000.00	50000/(1+10%)^7	$ 25,657.91
Yr 9	$ 50,000.00	50000/(1+10%)^8	$ 23,325.37
Yr 10	$ 50,000.00	50000/(1+10%)^9	$ 21,204.88
Yr 11	$ 50,000.00	50000/(1+10%)^10	$ 19,277.16
Yr 12	$ 50,000.00	50000/(1+10%)^11	$ 17,524.69
Yr 13	$ 50,000.00	50000/(1+10%)^12	$ 15,931.54
Yr 14	$ 50,000.00	50000/(1+10%)^13	$ 14,483.22
Yr 15	$ 50,000.00	50000/(1+10%)^14	$ 13,166.56
Yr 16	$ 50,000.00	50000/(1+10%)^15	$ 11,969.60
Yr 17	$ 50,000.00	50000/(1+10%)^16	$ 10,881.46
Yr 18	$ 50,000.00	50000/(1+10%)^17	$ 9,892.23
Yr 19	$ 50,000.00	50000/(1+10%)^18	$ 8,992.94
Yr 20	$ 50,000.00	50000/(1+10%)^19	$ 8,175.40
		Total	$ 468,246.00

So present worth of lottery $ 468,246.00

jeff jeffy answered 2 years ago

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