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17 February, 06:48

You just won the grand prize in a national writing contest! As your prize, you will receive $500 a month for 50 months. If you can earn 7 percent on your money, what is this prize worth to you today

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  1. 17 February, 06:51
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    Prize is $22,071.39 worth today

    Explanation:

    Present value of Annuity = A*[ (1 - (1+r) ^-n) / r]

    A - Annuity payment = 500

    r - rate per period = 6/12 =.5%

    n - no. of periods = 50

    Present value of Annuity = 500*[ (1 - (1.005) ^-50) /.005]

    = 500*[ (1-0.77928606825) /.005]

    = 500*44.14278635

    = $22,071.39
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