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), 64 years from now. What is the present value of your windfall if the appropriate discount rate is 9 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
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), 64 years from now. What is the present value of your windfall if the appropriate discount rate is 9 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 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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![**Present Value Calculation of Future Lottery Winnings**
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), 64 years from now.
What is the present value of your windfall if the appropriate discount rate is 9 percent? **(Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)**
**Present value calculation:**
[Input box for present value]
---
**Explanation of Present Value:**
The present value (PV) is the current value of a sum of money to be received in the future, discounted back to the present using a specific interest rate. In this context, it represents how much the future lottery winnings of $2 million are worth in today's dollars when considering the time value of money at a 9 percent discount rate over 64 years.
---
**Graph/Diagram Explanation:**
There are no graphs or diagrams in this image. If there were, they would typically illustrate the concept of discounting future cash flows to present value by showing the exponential decay of the value of future money.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F4075dd7b-7cf0-4080-a9ab-c20ff4793850%2F6cabf81c-d3ac-42f8-aa57-57b00e8396e3%2Fhk8o7gn_processed.png&w=3840&q=75)
Transcribed Image Text:**Present Value Calculation of Future Lottery Winnings**
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), 64 years from now.
What is the present value of your windfall if the appropriate discount rate is 9 percent? **(Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)**
**Present value calculation:**
[Input box for present value]
---
**Explanation of Present Value:**
The present value (PV) is the current value of a sum of money to be received in the future, discounted back to the present using a specific interest rate. In this context, it represents how much the future lottery winnings of $2 million are worth in today's dollars when considering the time value of money at a 9 percent discount rate over 64 years.
---
**Graph/Diagram Explanation:**
There are no graphs or diagrams in this image. If there were, they would typically illustrate the concept of discounting future cash flows to present value by showing the exponential decay of the value of future money.
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