You just won the lottery and after taxes you have $32,000. You want to have $1,000,000 by the time you are 65, which is 45 years from now. Assuming that you can earn 9 percent each on your money, how much (in dollars) of the $32,000 must you invest today?
A)$17,891.62
B)$18,524.91
C)$20,692.24
D)$22,943.28

Question

Quizplus · Accepted Answer

We can use the formula for future value of a lump sum:
FV = PV * (1 + r)^n
where FV is the future value, PV is the present value (what we want to find), r is the interest rate (9% or 0.09), and n is the number of periods (45 years).

Plugging in our values, we get:
$1,000,000 = PV * (1 + 0.09)^45
Divide both sides by (1 + 0.09)^45:
PV = $1,000,000 / (1 + 0.09)^45
PV = $20,692.24

Therefore, you need to invest $20,692.24 today to have $1,000,000 in 45 years, even after taxes. Choice C is the best answer, as it is the closest to our calculated value.

You Just Won the Lottery and After Taxes You Have