1. Suppose you receive an annual payment of $20,000 for a period of 10 years. The first payment will be made 5 years from now. If the interest rate is 5%, what is the present value of this payment stream? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

2. The $47.5 million lottery payment you just won actually pays out $1.9 million a year for 25 years. The interest rate is 10%.

A. If the first payment comes in 1 year, what is the present value of the earnings? (Do not round up intermediate calculations. Enter your answer rounded to 2 decimal places, not millions.)

B. What is the present value if the first payment is made immediately? (Do not round up intermediate calculations. Enter your answer rounded to 2 decimal places, not millions.)

Answer rating: 100% (QA)

1 To calculate the present value of the payment stream we need to discount each payment back to its ... View the full answer