Question

You have just received notification that you have won the $2.0 million first prize in the Centennial Lottery. However, the prize will be awarded on your 100th birthday (assuming you're around to collect), 66 years from now. What is the present value of your windfall if the appropriate discount rate is 8 percent?

Answer 1

$12446.92

Step-by-step explanation:

Given:

Future value = $2.0 million = $2,000,000

Time = 66 years

Discount rate = 8%

Now,

The present value is given as:

`\textup{Present value}=\frac{\textup{Future value}}{(1+r)^n}`

where,

r is the rate

n is the period

Therefore, on substituting the respective values, we get

`\textup{Present value}=\frac{\textup{2,000,000}}{(1+0.08)^(66)}`

or

Present value = $12446.92