Two years with the payments lasting forever

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Reference no: EM13966151

You have won a lottery that promises to pay you $6900 every two years with the payments lasting forever. The first payment will be made to you, 2 years from now. You want to open an account with 10% APR compounded semi-annually in the name of your nephew and direct your winnings to that account in exchange for his car which is worth $32,000 today.

Answer the following questions:

What is the effective interest rate applicable to the lottery payments.
What is the present value of the winnings?

Reference no: EM13966151

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