You have won a special type of lottery where you are to receive $200,000 in 4 years' time.The current interest rate is 6%.How much is the lottery win worth in today's dollars?

Question

Quizplus · Accepted Answer

To find the present value of the lottery win, we need to discount the future value by the present value factor, which is determined by the interest rate and the number of years. We can use the formula:
Present value = Future value / (1 + Interest rate)^Number of years

Substituting the given values, we get:
Present value = 200,000 / (1 + 0.06)^4
                     = 200,000 / 1.262
                     = 158,502 (rounded off to nearest dollar)

Therefore, the lottery win is worth $158,400 in today's dollars.

You Have Won a Special Type of Lottery Where You