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21 March, 00:20

Suppose a state lottery prize of $8 million is to be paid in 5 payments of $1,600,000 each at the end of each of the next 5 years. If money is worth 12%, compounded annually, what is the present value of the prize? (Round your answer to the nearest cent.)

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  1. 21 March, 02:21
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    The answer is $5767641.92

    Explanation:

    PV of an Annuity = C x [ (1 - (1+i) - n) / i ]

    PV of an Annuity = $1,600,000 x [ (1 - (1+0.12) - 5) / 0.12 ] = $5767641.92

    The present value of the prize is $5767641.92
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