You have just received notification that you have won the $2.15 million first prize in the Centennial Lottery. However, the prize will be awarded on your 100th birthday (assuming you're around to collect), 65 years from now. What is the present value of your windfall if the appropriate discount rate is 12 percent? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e. g., 1,234,567.89.)

Question

Business

Jenny Flowers

15 November, 22:39

You have just received notification that you have won the $2.15 million first prize in the Centennial Lottery. However, the prize will be awarded on your 100th birthday (assuming you're around to collect), 65 years from now. What is the present value of your windfall if the appropriate discount rate is 12 percent? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e. g., 1,234,567.89.)

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Answers (1)

Know the Answer?

Jaylan Hartman · Answer 1

The present value is $1359.24

Explanation:

Giving the following information:

You have just received notification that you have won the $2.15 million first prize in the Centennial Lottery.

You will receive the price 65 years from now. The interest rate is 12%.

We need to use the following formula:

PV = FV / (1+i) ^n

PV = 2150000 / (1.12^65) = 1359.24