Question

Shelley wants to cash in her winning lottery ticket. She can either receive five, $202,000 semiannual payments starting today, or she can receive a lump-sum payment now based on a 6% annual interest rate. What is the equivalent lump-sum payment?

Answer 1

AMOUNT 202000
RATE 6%
INTEREST 3%
NO OF PERIODS 5
Lumpsum Payment = A*PVAF@ I,N
                    =202000*4.58
                   =925160
Notes
PVAF @ I,N =(1-(1+I)^-N)/I
PVAF@ 3%,5 = (1-(1+3%)^-5)/3%
                           =4.58