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You have just won ​$20,000 in the state​ lottery, which promises to pay you ​$1,000​ (tax free) every year for the next twenty years. The interest rate is​ 5%. In​ reality, you receive the first payment of ​$1,000​ today, which is worth ​$ nothing today. ​(Round your response to the nearest penny.​) The value of the second​$1,000 payment is worth ​__________ $

Answer :

Answer:

$952.38

Explanation:

The net present value is given by the expression as shown below:

[tex]NPV=\frac{Future value}{(1+r)^{n} }[/tex]

Plugging the values in the above expression,

r=0.05

Future value =$1,000

n=1

[tex]NPV=\frac{1000}{(1+0.05)^{1} }\\NPV=952.38[/tex]

The value of the second​$1,000 payment is worth $ 952.38

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