Answer:
Present Value= $4,516,347.81
Explanation:
Giving the following information:
Richard won a lottery that will pay him $460,000 at the end of each of the next twenty years.
interest rate= 8% compounded annually.
First, we need to calculate the final value of the investment:
FV= {A*[(1+i)^n-1]}/i
A= annual pay
FV= {460,000*[(1.08^20)-1]} / 0.08
FV= $21,050,503.58
Now, we can determine the present value:
PV= FV/ (1+i)^n
PV= 21,050,503.58/ 1.08^20
PV= $4,516,347.81
