A major lottery advertises that it pays the winner $10 million. However this prize money is paid at the rate of $500,000 each year (with the first payment being immediate) for a total of 20 payments. What is the present value of this prize at 10% interest compounded annually? Report your answer in $millions, rounded to two decimal places. So, for example, if you compute the answer to be 5.7124 million dollars then you should submit an answer of 5.71.

The prize is worth 4.26 million dollars today.

Explanation:

Giving the following information:

Cash flow= $500,000

Interest rate= 10% compounded annually

Number of years= 20

First, we will calculate the future value using the following formula:

FV= {A*[(1+i)^n-1]}/i

A= annual cash flow

FV= {500,000*[(1.10^20) - 1]} / 0.10

FV= $28,637,499.75

Now, the present value:

PV= FV/(1+i)^n

PV= 28,637,499.75/1.10^20

PV= $4,256,781.86

The prize is worth 4.26 million dollars today.

answer: nobody

explanation:

answer; closing the loop;