Question

You just won the lottery! As your prize you will receive $1,200 a month for 100 months starting today. If you can earn 8% on your money, what is this prize worth to you today

Answer 1

Answer: $87,380.23

Explanation: n = 100

I/Y = 8%/12

PMT = 1,200

AVP = 1,200 × (1-(1/(1+0.08/12)^100))/(0.08/12) = 1,200 × 72.816858 = 87,380.23