$110 A state lottery commission pays the winner of the Million Dollar lottery 25

Question

$110 A state lottery commission pays the winner of the Million Dollar lottery 25 installments of $40,000/year. The com the first payment of $40,000 immediately and the other n = 24 payments at the end of each of the next 24 years. Determine how much money the with the bank earns interest at the rate of 2%/year compounded yearly. Hint: Find the present value of the annuity. (Round your answer to the nearest cent.) $717,421.68 n should have in the bank initially to guarantee the payments, assuming that the balance on deposit

Explanation / Answer

Hi,
Present value of annuity is given by thr formula,
F= P(1-(1+r)-n)/r
where r=2%, P= periodic payment i. 40,000 an n=24,
substituting we gt, F= 756,557.02

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