the appropriate discount rate is 6.8 percent, what is the present value of your winnings? (Do not round Intermedilate calculations and round your answer to 2 decimal plecN, eg, 32.16)
the appropriate discount rate is 6.8 percent, what is the present value of your winnings? (Do not round Intermedilate calculations and round your answer to 2 decimal plecN, eg, 32.16)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:You have just won the lottery and wil receive $1500,000 in one year. You wil receive
payments for 30 years, and the payments will increase 27 percent per year
7the appropriate discount rate is 6.8 percent, what is the present value of your
winnings? (Do not round Intermediate calculations and round your answer to 2
decimal plac, 4 9,42.16
Present value
Expert Solution
Step 1
Present Value:
It represents the present worth of the future periodic annuity payments. It is calculated by discounting these future annuity payments by an appropriate discount rate.
Information Provided:
Lottery amount (pmt) = $1,500,000
Number of payments (n) = 30
Growth rate (g) = 2.70%
Discount rate (r)= 6.80%
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