Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Suppose that you win the Powerball Lottery. The stated prize is $358 million. If you agree to take the payout over 30 years in the

image text in transcribed
Suppose that you win the Powerball Lottery. The stated prize is $358 million. If you agree to take the payout over 30 years in the form of an annuity due, then each payment equals the stated prize divided by 30. The first payment will be made to you immediately, and the remaining 29 future payments will be paid out annually (beginning one year from today). Alternatively, you can take the lump sum payout. This payout is calculated as the present value of the annuity due described above. The annual rate of return used in this calculation is the estimated rate of return that the sponsor (the Multi-State Lottery Association, or MUSL) forecasts that it can earn by investing the funds necessary to support the annuity payout. For the sake of this example, suppose that the projected annual rate of return is 4.51% per year. What is the lump sum payout (before taxes, of course) Express your answer in $ millions to 3 decimal places. (For example, type "10" for "$10 million" or "$10,000,000": or 11.253 for "$11, 253 million" or "$11, 253,000")

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

Enron And World Finance A Case Study In Ethics

Authors: P. Dembinski, C. Lager, A. Cornford, J. Bonvin

1st Edition

1403947635, 978-1403947635

More Books

Students also viewed these Finance questions