Martha Gentry won an $13,800,000 lottery and elected to receive her winnings in 30 equal annual installments. After receiving the first 10 installments, Martha and her husband divorced, and the remaining 20 payments became part of the property settlement. The judge who presided over the divorce proceedings awarded one-half interest in the future lottery payments to Martha and the other half to her ex-husband. Following the divorce, Martha decided to sell her interest in the 20 remaining lottery payments to raise the cash needed to open a flower store. An investor has offered Martha $1,717,962. Click here to view the factor table. What discount rate did the investor use in calculating the purchase price?

Discount rate

%

APPENDIX 9-1

Present value of $1 received in n periods

Periods	4%	5%	6%	7%	8%	9%	10%	11%	12%	13%	14%	16%	18%	20%
1	0.9615	0.9524	0.9434	0.9346	0.9259	0.9174	0.9091	0.9009	0.8929	0.8850	0.8772	0.8621	0.8475	0.8333
2	0.9246	0.9070	0.8900	0.8734	0.8573	0.8417	0.8264	0.8116	0.7972	0.7831	0.7695	0.7432	0.7182	0.6944
3	0.8890	0.8638	0.8396	0.8163	0.7938	0.7722	0.7513	0.7312	0.7118	0.6931	0.6750	0.6407	0.6086	0.5787
4	0.8548	0.8227	0.7921	0.7629	0.7350	0.7084	0.6830	0.6587	0.6355	0.6133	0.5921	0.5523	0.5158	0.4823
5	0.8219	0.7835	0.7473	0.7130	0.6806	0.6499	0.6209	0.5935	0.5674	0.5428	0.5194	0.4761	0.4371	0.4019
6	0.7903	0.7462	0.7050	0.6663	0.6302	0.5963	0.5645	0.5346	0.5066	0.4803	0.4556	0.4104	0.3704	0.3349
7	0.7599	0.7107	0.6651	0.6227	0.5835	0.5470	0.5132	0.4817	0.4523	0.4251	0.3996	0.3538	0.3139	0.2791
8	0.7307	0.6768	0.6274	0.5820	0.5403	0.5019	0.4665	0.4339	0.4039	0.3762	0.3506	0.3050	0.2660	0.2326
9	0.7026	0.6446	0.5919	0.5439	0.5002	0.4604	0.4241	0.3909	0.3606	0.3329	0.3075	0.2630	0.2255	0.1938
10	0.6756	0.6139	0.5584	0.5083	0.4632	0.4224	0.3855	0.3522	0.3220	0.2946	0.2697	0.2267	0.1911	0.1615
11	0.6496	0.5847	0.5268	0.4751	0.4289	0.3875	0.3505	0.3173	0.2875	0.2607	0.2366	0.1954	0.1619	0.1346
12	0.6246	0.5568	0.4970	0.4440	0.3971	0.3555	0.3186	0.2858	0.2567	0.2307	0.2076	0.1685	0.1372	0.1122
13	0.6006	0.5303	0.4688	0.4150	0.3677	0.3262	0.2897	0.2575	0.2292	0.2042	0.1821	0.1452	0.1163	0.0935
14	0.5775	0.5051	0.4423	0.3878	0.3405	0.2992	0.2633	0.2320	0.2046	0.1807	0.1597	0.1252	0.0985	0.0779
15	0.5553	0.4810	0.4173	0.3624	0.3152	0.2745	0.2394	0.2090	0.1827	0.1599	0.1401	0.1079	0.0835	0.0649
16	0.5339	0.4581	0.3936	0.3387	0.2919	0.2519	0.2176	0.1883	0.1631	0.1415	0.1229	0.0930	0.0708	0.0541
17	0.5134	0.4363	0.3714	0.3166	0.2703	0.2311	0.1978	0.1696	0.1456	0.1252	0.1078	0.0802	0.0600	0.0451
18	0.4936	0.4155	0.3503	0.2959	0.2502	0.2120	0.1799	0.1528	0.1300	0.1108	0.0946	0.0691	0.0508	0.0376
19	0.4746	0.3957	0.3305	0.2765	0.2317	0.1945	0.1635	0.1377	0.1161	0.0981	0.0829	0.0596	0.0431	0.0313
20	0.4564	0.3769	0.3118	0.2584	0.2145	0.1784	0.1486	0.1240	0.1037	0.0868	0.0728	0.0514	0.0365	0.0261
PVn,i=$1(1+i)n

APPENDIX 9-2

Present value of an annuity of $1 per period

Periods	4%	5%	6%	7%	8%	9%	10%	11%	12%	13%	14%	16%	18%	20%
1	0.9615	0.9524	0.9434	0.9346	0.9259	0.9174	0.9091	0.9009	0.8929	0.8850	0.8772	0.8621	0.8475	0.8333
2	1.8861	1.8594	1.8334	1.8080	1.7833	1.7591	1.7355	1.7125	1.6901	1.6681	1.6467	1.6052	1.5656	1.5278
3	2.7751	2.7232	2.6730	2.6243	2.5771	2.5313	2.4868	2.4437	2.4018	2.3612	2.3216	2.2459	2.1743	2.1065
4	3.6299	3.5460	3.4651	3.3872	3.3121	3.2397	3.1698	3.1024	3.0373	2.9745	2.9137	2.7982	2.6901	2.5887
5	4.4518	4.3295	4.2124	4.1002	3.9927	3.8897	3.7907	3.6959	3.6048	3.5172	3.4331	3.2743	3.1272	2.9906
6	5.2421	5.0757	4.9173	4.7665	4.6229	4.4859	4.3553	4.2305	4.1114	3.9975	3.8887	3.6847	3.4976	3.3255
7	6.0021	5.7864	5.5824	5.3893	5.2064	5.0330	4.8684	4.7122	4.5638	4.4226	4.2883	4.0386	3.8115	3.6046
8	6.7327	6.4632	6.2098	5.9713	5.7466	5.5348	5.3349	5.1461	4.9676	4.7988	4.6389	4.3436	4.0776	3.8372
9	7.4353	7.1078	6.8017	6.5152	6.2469	5.9952	5.7590	5.5370	5.3282	5.1317	4.9464	4.6065	4.3030	4.0310
10	8.1109	7.7217	7.3601	7.0236	6.7101	6.4177	6.1446	5.8892	5.6502	5.4262	5.2161	4.8332	4.4941	4.1925
11	8.7605	8.3064	7.8869	7.4987	7.1390	6.8052	6.4951	6.2065	5.9377	5.6869	5.4527	5.0286	4.6560	4.3271
12	9.3851	8.8633	8.3838	7.9427	7.5361	7.1607	6.8137	6.4924	6.1944	5.9176	5.6603	5.1971	4.7932	4.4392
13	9.9856	9.3936	8.8527	8.3577	7.9038	7.4869	7.1034	6.7499	6.4235	6.1218	5.8424	5.3423	4.9095	4.5327
14	10.5631	9.8986	9.2950	8.7455	8.2442	7.7862	7.3667	6.9819	6.6282	6.3025	6.0021	5.4675	5.0081	4.6106
15	11.1184	10.3797	9.7122	9.1079	8.5595	8.0607	7.6061	7.1909	6.8109	6.4624	6.1422	5.5755	5.0916	4.6755
16	11.6523	10.8378	10.1059	9.4466	8.8514	8.3126	7.8237	7.3792	6.9740	6.6039	6.2651	5.6685	5.1624	4.7296
17	12.1657	11.2741	10.4773	9.7632	9.1216	8.5436	8.0216	7.5488	7.1196	6.7291	6.3729	5.7487	5.2223	4.7746
18	12.6593	11.6896	10.8276	10.0591	9.3719	8.7556	8.2014	7.7016	7.2497	6.8399	6.4674	5.8178	5.2732	4.8122
19	13.1339	12.0853	11.1581	10.3356	9.6036	8.9501	8.3649	7.8393	7.3658	6.9380	6.5504	5.8775	5.3162	4.8435
20	13.5903	12.4622	11.4699	10.5940	9.8181	9.1285	8.5136	7.9633	7.4694	7.0248	6.6231	5.9288	5.3527	4.8696
PVAn,i=$11(1+i)ni