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Jose wants to cash in his winning lottery ticket. He can either receive seven, $2,000 annual payments starting today, or he can receive one lump-sum payment today based on a 3% annual interest rate. What would be the lump-sum payment

Respuesta :

Answer:

Hence the Lumpo-sum Payment is $12834.38(Approx).

Explanation:  

Present value of annuity due= (1+interest rate)*Annuity[1-(1+interest rate)^-time                                                                    

                                                                                           period]/rate

                                               = (1+0.03) x 2000 [1-(1+0.03)^ -7] / 0.03  

                                               [tex]=1.03\times 2000[1-(1.03)^{-7} ]/0.03\\=2060 \times 6.23\\=$12834.38(Approx).[/tex]

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