A $300,000 lottery prize pays $30,000 per year for the next 10 years. If the current rate of return is 8.25%, what is the present value of this prize?

Question

A $300,000 lottery prize pays $30,000 per year for the next 10 years. If the current rate of return is 8.25%, what is the present value of this prize? ​

Quizplus · Accepted Answer

The present value of an annuity can be calculated using the formula PV = P * [(1 - (1 + r)^-n) / r], where P is the payment amount, r is the rate per period, and n is the number of periods. Here, P = $30,000, r = 0.0825, and n = 10. Plugging these values into the formula gives a present value of approximately $199,052.12.

A $300,000 Lottery Prize Pays $30,000 Per Year for the Next