Question

You've just won the lottery! Your winnings will be paid as a monthly annuity of $1,000 per month for 50 years. Assume an interest rate of 10 percent compounded monthly. (Do not round intermediate calculations. Round your final answer two decimal places.) What is the present value of your winnings if the first payment starts today

Answer 1

$119,220.57

Step-by-step explanation:

in order to calculate the present value of your lottery winnings, we can use the present value annuity factor:

present value = monthly payment x annuity factor (PV annuity factor, ¹⁰/₁₂%, 600 periods)

• monthly payment = $1,000
• annuity factor = 119.22057

present value = $1,000 x 119.22057 = $119,220.57