Need business and finance help with the present value of the lottery

Business & Finance
Tutor: None Selected Time limit: 1 Day

If you won $40 million in the lottery, and elected to receive an annuity for $2 million a year for 20 years, assume that a 4% interest rate is used to evaluate the annuity, that will be received at each payment. What is the present value of the lottery?  And how much interest is earned on the present value to make the $2 million-per-year payment?

Nov 8th, 2015

Thank you for the opportunity to help you with your question!

Given, annuity, R=$2million a year

Time period, t=20 years

Interest rate, r=4%

Present worth,

 

  =$27.18 million

Interest earned per year=4% of present worth=0.04*$27.18 million=$1.08 million


Please let me know if you need any clarification. I'm always happy to answer your questions.
Nov 8th, 2015

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Nov 8th, 2015
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Nov 8th, 2015
Dec 11th, 2016
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