You have just won a lottery that promises to pay you $1,000,000 in 5 years. What is the present value of this lottery win at the continuously discounted rate of 10%?
A) $621,000
B) $606,531
C) $648,720
D) $904,837

Question

Quizplus · Accepted Answer

The formula for present value at continuously compounded discount rate is given by PV = FV * e^(-rt), where PV is present value, FV is future value, r is the discount rate, and t is time. 
Plugging in the values, we get PV = $1,000,000 * e^(-0.1*5) = $606,531. 
Therefore, the best choice is B.

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