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11 March, 20:35

You just won the lottery, which promises you $990,000 per year for the next 20 years. You receive the first payment today (hint: annuity due). If your discount rate is 9.75%, what is the present value of your winnings

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  1. 11 March, 20:37
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    The present value of your winnings is $9,410,263.59

    Explanation:

    Present value of annuity due = (1+rate) * Annuity[1 - (1+interest rate) ^-time period]/rate

    =1.0975 x 990,000 [1 - (1.0975) ⁻²⁰]/0.0975

    =990,000 x 9.50531677

    =$9,410,263.59
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