The florida lottery agrees to pay the winner 284000 at the e

The florida lottery agrees to pay the winner $284,000 at the end of each year for the next 20 years. What is the future value of this prize if each payment is put in account earning .08? Please show calculations

Solution

Cash flow (c) = $ 284000

Time (n) = 20 years

Interest rate = 0.08

Future value of payement received each year = c* [ (1+i)ⁿ - 1 /i ]* (1+i)

= $284000 * [ (1+0.08)²⁰ - 1 / 0.08 ] * (1 + 0.08)

= $284000 * 45.76196 * 1.08

= 14036110