In a lottery, the winner is paid 6.4 million dollars at the rate of $320,000 a year for 20 years. These payments form an ordinary annuity. If the lottery managers can invest money at 6.25% compounded annually, what is the lump sum they must put away?

This is a question in my textbook, and I cannot figure it out, any help?
Please?

I’m getting $3,597,030.57 using the present value function in Excel.

What is a complicated instrument that requires a sunk cost in the beginning, an annuity in some middle period, and an end-of-investment-horizon lump sum?
thnx
This is for a class. i need help..geesh smart mouth..lolz

I hope you didn’t Buy an Annuity from
some company and you don’t know
the terms of the contract. God help you.
Go back and ask questions .

Unless you have already retired, you should NOT "want to Buy an Annuity", they are a lousy product for all but the most nervous elderly investors who want a "safe" income stream…

If an "adviser" is recommending this (and you are under 70), drop them at once, they are not to be trusted! (Annuities pay the salesperson among the highest commission of any investment product they can sell….that should tell you all you need to know about them!)

Hi:
Obviously I know an individual can buy a deferred annuity, but can you buy one with business funds–either as an S-corp or sole proprietorship– if you’re interested in deferring some of your income for later?
thanks,
MG

Why pay for a defferred annuity.
They carry high costs, and not to mention if you want to take your money out early- you pay high penalties.

Why not just open a brokerage account, invest the money into something safe like 30 year cd’s, and never pay a fee to an annuity company.
Later, when you are getting ready to retire, you can either take out 4% a year yourself, or pay a company large sums of money to write you a check every month.
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