You won a lottery that will make equal payments of $1, 000 at the end of each ye

Question

You won a lottery that will make equal payments of $1, 000 at the end of each year for the next eight years. If the annual interest rate stays constant at 7%, what is the value of these payments in today's dollars? Round your answer to the nearest whole dollar. $7, 464. $6, 389. $5, 971. $5, 075.You found out that now you are going to receive payments of $7, 000 for the next 14 years. You will receive these payments at the beginning of each year. The annual interest rate will remain constant at 13%. What is the present value of these payments? Round your answer to the nearest whole dollar. $39, 882. $49, 853. $44, 118. $67, 302.

Explanation / Answer

Present value = Cash flow × 7% factors accumulated upto 8th year

                        = $1,000 × 5.9713

                        = $5,971.3

                        = $5,971 (after rounding)

Answer: the third option

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