In early 2019, the Powerball lottery was advertised as having a payoff of $750,000,000. The winner was
Question:
In early 2019, the Powerball lottery was advertised as having a payoff of $750,000,000. The winner was given the choice of receiving $465,500,000 at once or equal annual payments over the next 30 years that would total $750,000,000.
a. Is the lottery being accurate in stating that the winner will receive $750,000,000? Briefly explain.
b. At an interest rate of 10 percent, what would be the present value of the 30 annual payments?
c. At an interest rate of 5 percent, what would be the present value of the 30 annual payments?
d. What interest rate would make the present value of the 30 payments equal to the one payment of $465,500,000? (This question is difficult and requires the use of a financial calculator or a spreadsheet.
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