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mathematics

Brooke won $100 000 in a lottery. The price will be paid in yearly installments of $10 000 each year for 10 years. What is the present value of her winnings, if the current interest rates are 6.4% per annum, compounded annually?

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  1. P(1 + 0.064)^10 = 100000
    P = 53,775.40

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  2. We are asked for the present value of an annuity

    present value = $10,000(1 - 1.064)^-10 / .064
    = $72,225.92

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  3. ouch! forgot about the payments!
    good catch, as usual.

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