Your best friend just won the Florida lottery. She has the choice of $15,900,000 today or an annuity with payments of $1,250,000 for 20 years, with the first payment coming one year from today. What rate of return is built into the annuit- Disregard any tax consequences. Your answer should be between 2.01 and 14.74, rounded to 2 decimal places, with no special characters.
Present value is the current worth of a future sum of money, given a specific interest rate or discount rate. It is the concept that money available in the future is worth less than the same amount of money in the present, because of the time value of money. Future value (FV) refers to the value of an investment or an asset at a specified point in the future, assuming a specified rate of return. It is the expected value of a cash flow or a series of cash flows that will occur in the future, after interest has been applied. Future value is calculated by taking the present value of an investment and adding interest, which results in the value of the investment at a future point in time. Future value calculations are important in financial planning, investing, and determining the worth of assets or liabilities in the future.
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