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Powerball is a lottery available in most of the U.S. Tickets cost $2 and if you match all six numbers that are drawn you win
Powerball is a lottery available in most of the U.S. Tickets cost $2 and if you match all six numbers that are drawn you win or share the grand prize. The odds of winning the grand prize for any drawing are 1 in 292,201,338. That means any ticket has a 0.0000003422% chance of winning the grand prize. The current grand prize is $20,000,000 paid out as an annuity in 30 payments starting now and each year for the next 29 years. The payment amount grows by 5% annually. Alternatively, you can take a payment of $10,600,000 today. Assignment -Calculate the annuity stream for the 30 payments totaling $20,000,000 -Determine the breakeven interest rate that equates the present value of that annuity stream with the $10,600,000 upfront payment option. -Explain to me which option You would select and why. (2 paragraphs) -Calculate the expected value of one ticket ( cost$2 ) based on the current grand prize options. -Calculate the lump sum jackpot option that creates a \$2 expected value for a ticket
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