Tessa won the lottery for $2,500,000 but due to a change in state laws she will

Question

Tessa won the lottery for $2,500,000 but due to a change in state laws she will not be able to collect it for three years. Ralph is willing to give her a lump sum today in return for the payment in three years. If current interest rates are 14% per year, how much will Tessa received today?
A. $5,804,080 B. $1,687,430 C. $3,703,869 D. $2,500,000 Tessa won the lottery for $2,500,000 but due to a change in state laws she will not be able to collect it for three years. Ralph is willing to give her a lump sum today in return for the payment in three years. If current interest rates are 14% per year, how much will Tessa received today?
A. $5,804,080 B. $1,687,430 C. $3,703,869 D. $2,500,000
A. $5,804,080 B. $1,687,430 C. $3,703,869 D. $2,500,000

Explanation / Answer

B. $1,687,430

Amount Tessa will received today:

= $2,500,000 × 0.6749715

= $1,687,430

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