Question

Present value of an annuity On January 1, you win $50,000,000 in the state lottery. The $50,000,000 prize will be paid in equal installments of $6,250,000 over eight years. The payments will be made on December 31 of each year, beginning on December 31 of this year. The current interest rate is 5.5%. This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the question below. Open spreadsheet Determine the present value of your winnings. Round your answer to the nearest dollar.

$

Present value of an annuity
DATA
Sum of prize	$50,000,000
Annual payment	$6,250,000
Number of years	8
Interest rate	5.5%
Date of win	January 1
Date of payments	December 31 of each year
Using formulas and cell references, perform the required analysis, and input your answer into the Amount column. Transfer the numeric result for the green entry cell (B14) into the appropriate field in CNOWv2 for grading.
	Amount	Formula
PV of annual payments

Answer 1

	Issue price of bonds	Period	Cashflows	Present value	Calculation
		1	$62,50,000	$59,24,171	(6250000/(1+0.055)^1)
		2	$62,50,000	$56,15,328	(6250000/(1+0.055)^2)
		3	$62,50,000	$53,22,585	(6250000/(1+0.055)^3)
		4	$62,50,000	$50,45,105	(6250000/(1+0.055)^4)
		5	$62,50,000	$47,82,090	(6250000/(1+0.055)^5)
		6	$62,50,000	$45,32,786	(6250000/(1+0.055)^6)
		7	$62,50,000	$42,96,480	(6250000/(1+0.055)^7)
		8	$62,50,000	$40,72,493	(6250000/(1+0.055)^8)
	PV of Bond			$3,95,91,037