You lost your best friend's winning lottery ticket

Finance Nov 03, 2020

You lost your best friend's winning lottery ticket. So you decide to lie and tell her that the lottery officials will begin payment of her winnings 10 years later. When payment begins she will receive $16,000 per year (paid at the end of each year) for 20 years. Given that your return stays stable at exactly 7%, how much should you save at the end of each of the next ten years so that you can pay her winnings?

Expert Solution

Amount to be saved each year is given as=16000/7%*(1-1/1.07^20)*7%/(1.07^10-1)
=12268.29272

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