Question

You have just won the Mega Millions Lottery with a jackpot of $54,000,000. Your winnings will be paid to you in 26 equal annual installments with the first payment made immediately. If you had the money now, you could invest it in an account with a quoted annual interest rate of 12% with monthly compounding of interest. What is the present value of the stream of payments you will receive?

Answer #1

Monthly installment received for jackpot = $54,000,000/26 = $2076923.08

Using excel function PV to find PV of the stream of payments you will receive

Rate per month = 12%/12 = 1%

PMT | 2076923.08 |

NPER | 26 |

Rate per period | 0.01 |

PV | ($47,817,323.38) |

Hence, the present value of the stream of payments you will receive = $47,817,323.38

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