Question
Asked Nov 9, 2019
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YOU WIN $500,000 do you want to be paid out all at once or do you want to receive annual end of year payments of $33,000 for 20 years. you can earn 3% per year, what is the persent value of the annuity stream.

 

 

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Expert Answer

Step 1

Calculation of Present Value of Annuity Stream:

The present value of annuity stream is $490,956.67.

Excel Spreadsheet:

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А В 1 Annual Payments 2 Interest Rate $33,000 3% 3 Number of Years 20 4 PV of Annuity Stream $490,956.67

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Step 2

Excel Workings:

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А В 1 Annual Payments 33000 0.03 20 2 Interest Rate 3 Number of Years 4 PV of Annuity Stream PV(B2,B3,-B1,0)

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Time Value

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