document.write( "Question 1198671: Suppose a state lottery prize of $3 million is to be paid in 25 payments of $120,000 each at the end of each of the next 25 years. If money is worth 11%, compounded annually, what is the present value of the prize? (Round your answer to the nearest cent.)
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Algebra.Com's Answer #848312 by ikleyn(52777) $\"\"$ $\"About$

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\n" ); document.write( "Suppose a state lottery prize of $3 million is to be paid in 25 payments of $120,000 each
\n" ); document.write( "at the end of each of the next 25 years. If money is worth 11%, compounded annually,
\n" ); document.write( "what is the present value of the prize? (Round your answer to the nearest cent.)
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document.write( "We have a sinking fund.  Its initial value is unknown and we should find it - it is a present value of the fund.\r\n" );
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document.write( "We know that the initial money is deposited for 25 years at 11% annual rate, \r\n" );
document.write( "paid out $120,000 and compounded (both) at the end of each year.\r\n" );
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document.write( "Use the formula for the present value of such sinking fund\r\n" );
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document.write( "    PV = ,\r\n" );
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document.write( "where PV is the present value, PMT is the annual payment value, \r\n" );
document.write( "r is the annual rate, n is the number of payment/compounding (the number of years, in this problem).\r\n" );
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document.write( "With the given data, the formula for calculations is\r\n" );
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document.write( "    PV =  =  = 1,010,609.36  dollars.\r\n" );
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document.write( "ANSWER.  The present value of the prize is  $1,010,609.36.\r\n" );
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document.write( "         This amount should be deposited initially, and it will provide\r\n" );
document.write( "         no-failure payments of $120,000 at the end of each year during 25 years,\r\n" );
document.write( "         under given conditions.\r\n" );
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