The winner of a lottery receives m dollars at the end of each year for N years The present value (PV) of this prize in todays dollars is where r is the interest rate Calculate PV if m $50,000, r 0 06 (corresponding to 6 ), and N 20 What is PV if N N pv m r)' m(1 PV i 1...

For the given values r m and N we have 20 50000 ...

The winner of a lottery receives m dollars at the end of each year for N years.

Question:

The winner of a lottery receives m dollars at the end of each year for N years. The present value (PV) of this prize in today’s dollars is N pv = m + r)'. m(1 - PV i=1 where r is the interest rate. Calculate PV if m = $50,000, r = 0.06 (corresponding to 6%), and N = 20. What is PV if N = ∞?