Question

Paulo has won the lottery. He is offered a series of payments of $10,000 per year for 10 years. What is the present value of these payments at an interest/discount rate of 6%

Answer 1

Answer:

PV= $73,600.87

Explanation:

Giving the following information:

Annual payments= $10,000

Number of periods= 10 years

Interest rate= 6%

To calculate the present value, we need to use the following formula:

PV= A*{(1/i) - 1/[i*(1 + i)^n]}

A= annual payment

PV= 10,000*{(1/0.06) - 1/[0.06*(1.06^10)]}

PV= $73,600.87