Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

please show your work :) The Powerball jackpot is currently estimated to be $610 million with a cash value of $292.6 million. On the Powerball

please show your work :)

image text in transcribed

The Powerball jackpot is currently estimated to be $610 million with a cash value of $292.6 million. On the Powerball website, the payment options are described as - an annuity with "30 graduated payments over 29 years" where the "annual payments increase by 5% until the 30 th and final payment," or - "a lump-sum payment." The annuity payments are determined so that numerical values of "the 30 payments added up equal the value of the annuity," i.e., the estimated jackpot is simply the sum of all payments without considering the time value of money, and it is not its future value at t=30. IThe website also states that "the cash value option, in general, is the amount of money required... to fund the estimated jackpot annuity," i.e., the cash value is the present value of the annuity. The annual effective interest rate i used in the calculation of the value of the annuity option (using the standard notation from class) is decided after ticket sales are final after meetings with potential lenders, but the interest rate is estimated in advance to give an approximate jackpot. Find i for the current estimated Powerball jackpot options. You may want to use software (WolframAlpha will do) to find roots to any high-degree polynomials; make sure to note in your solution where any computations were done that can't be completed using a basic scientific calculator. The Powerball jackpot is currently estimated to be $610 million with a cash value of $292.6 million. On the Powerball website, the payment options are described as - an annuity with "30 graduated payments over 29 years" where the "annual payments increase by 5% until the 30 th and final payment," or - "a lump-sum payment." The annuity payments are determined so that numerical values of "the 30 payments added up equal the value of the annuity," i.e., the estimated jackpot is simply the sum of all payments without considering the time value of money, and it is not its future value at t=30. IThe website also states that "the cash value option, in general, is the amount of money required... to fund the estimated jackpot annuity," i.e., the cash value is the present value of the annuity. The annual effective interest rate i used in the calculation of the value of the annuity option (using the standard notation from class) is decided after ticket sales are final after meetings with potential lenders, but the interest rate is estimated in advance to give an approximate jackpot. Find i for the current estimated Powerball jackpot options. You may want to use software (WolframAlpha will do) to find roots to any high-degree polynomials; make sure to note in your solution where any computations were done that can't be completed using a basic scientific calculator

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Internal Auditing Assurance & Consulting Services

Authors: Kurt F Reading, Paul J Sobel, Urton L Anderson, Michael J Head, Sri Ramamoorti

1st Edition

0894136100, 9780894136108

More Books

Students also viewed these Accounting questions