eBook

Calculator

Present Value of an Annuity

On January 1, you win $50,000,000 in the state lottery. The $50,000,000 prize will be paid in equal installments of $6,250,000 over eight years. The payments will be made on December 31 of each year, beginning on December 31 of this year. If the current interest rate is 12%, determine the present value of your winnings. Use the present value tables in Exhibit 7. Round to the nearest whole dollar. $

Will the present value of your winnings using an interest rate of 12% be more than the present value of your winnings using an interest rate of 5%?