Make the present value of both prizes equivalent

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Reference no: EM131300758

John has just won the lottery. John has won the lump sum amount of $1550 but must wait until the end of 10 years to receive the prize. John would rather receive a different pattern of payments: $250 today and then receive some unknown lump sum amount that will be received in 10 years. Using an interest rate of 2.50%, determine the unknown lump sum amount that would make the present value of both prizes equivalent.

Reference no: EM131300758

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