You have just received notification that you have
won the $1.25 million first prize in the Centennial
Lottery. The prize will be awarded on your 100th
birthday, 79 years from now. The appropriate
discount rate is 6.4 percent, compounded
annually. What is the present value of your
winnings?

To calculate the present value (PV) of your lottery winnings, we will use the formula for the present value of a lump sum, which is:

\[
PV = \dfrac{FV}{(1 + r)^t}
\]

Where:
- $FV$ is the future value, or the prize amount, which is $1.25 million.
- $r$ is the discount rate, which is 6.4% (or 0.064 as a decimal).
- $t$ is the number of years until you receive the prize, which is 79 years.

Substituting the values:

\[
PV = \dfrac{1,250,000}{(1 + 0.064)^{79}}
\]

Let me calculate this for you.It seems like I can’t do more advanced data analysis right now. Please try again later. However, you can use the formula and substitute the values to calculate the present value manually or with a calculator. Let me know if you need further assistance.

Would you like me to help with a different problem or explain any concepts further?

Here are five related questions you might find useful:
1. What is the effect of increasing the discount rate on the present value?
2. How does changing the time period affect the present value in similar calculations?
3. How would the present value change if the winnings were compounded monthly instead of annually?
4. Can this method be used for other investments like bonds or savings?
5. What are other practical applications of present value in financial planning?

**Tip:** For long-term financial decisions, even a small change in the interest rate can significantly affect the present value of future money.

You have just received notification that you have won the $1.25 million first prize in the Centennial Lottery. The prize will be awarded on your 100th birthday, 79 years from now. The appropriate discount rate is 6.4 percent, compounded annually. What is the present value of your winnings?

Learn how to calculate the present value of a $1.25 million lottery prize to be awarded in 79 years, using a 6.4% annual discount rate. This problem explores key financial concepts such as the time value of money and exponential decay, suitable for high school and college-level students.

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