Suppose you have a winning lottery ticket and you are given the option of accepting $3000000 three years from now or taking the present value of the $3000000 now. The sponsor of the prize uses a 6% discount rate. If you elect to receive the present value of the prize now the amount you will receive is
A) $2518860.
B) $2591520.
C) $2670000.
D) $3000000.

Question

Quizplus · Accepted Answer

The present value (PV) of the future amount can be calculated using the formula PV = FV / (1 + r)^n, where FV is the future value ($3,000,000), r is the discount rate (6% or 0.06), and n is the number of years (3). Plugging in the values, PV = $3,000,000 / (1 + 0.06)^3 = $2,518,860.

Suppose You Have a Winning Lottery Ticket and You Are