You have just won the lottery and you can choose between the following payout options. The annual interest rate (EAR) is 8%.

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You have just won the lottery and you can choose between the following payout options. The annual interest rate (EAR) is 8%. Ten payments of $100,000 received every three years; the first payment is made two years from today (i.e., payments are at t = 2, 5, 8, …, 29). PV=?

R3 = 1.08^3 – 1 = 25.9712%

PV = 100.000 × [1/0.259712 × (1 – 1/1.259712^10)] × 1.08 = 374,520

the underline 1.08: why times 1.08 ? where did it comes from?

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