Question 237755: A PERSON WINS A $60 MILLLION LOTTERY, THEY RECEIVE $1 MILLION FOR THE NEXT 50 YEARS PLUS AN ADDITIONAL LUMP SUM PAYMENT OF $10 MILLION AFTER 50 YEARS. THE DISCOUNT RATE IS 10%. WHAT IS THE CURRENT VALUE OF THE WINNINGS?
Answer by Theo(13342)   (Show Source):
You can put this solution on YOUR website! $10 million in 50 years is worth about $85,185 today.
Present worth of $1 million annual payments compounded at 10% annually over the next 50 years is worth $9,914,814 today.
The combined value today would be worth $9,829,629.
That's 9 million 829 thousand 629 dollars.
That amount of money, if invested for the next 50 years at 10% interest compounded annually, would be worth $1,153,908,589.
That's 1 billion 153 million 908 thousand 589 dollars.
The present worth of future money assumes that the money can be invested at the discount rate.
$10 million doesn't sound like a lot today, but in 50 years it sure adds up to a lot of money if invested at the discount rate.
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