Stacey Trail has just won the Lotto.Her prize pays $40,000 at the end of each year for 5 years.In addition, she will receive a one-time payment of $240,000 at the end of 5 years.Using the following factors at 10%, what amount has Stacey really won in the Lotto?

Question

Quizplus · Accepted Answer

This problem involves calculating the present value of an annuity (the $40,000 per year for 5 years) and the present value of a single lump sum payment ($240,000 in 5 years). Using a financial calculator or Excel, we can find that the present value of the annuity is $161,307. The present value of the lump sum payment is $148,345. Adding these two values gives us the total amount Stacey has won, which is $309,652. Therefore, the best choice is B, which is closest to this amount.

Stacey Trail Has Just Won the Lotto