Powerball is a lottery in the US that is available in most states. Tickets cost $2. There
Question:
Powerball is a lottery in the US that is available in most states. Tickets cost $2. There are a few different ways to win.
The Grand Prize payout odds are 1 in 292.201,338
The odd of winning a $1,000,000 payout are 1 in 11,688,053
The current Grand Prize of $65,000,000 paid as an annuity described below or an upfront cash payout of $33,700,000
The annuity option is paid out in 30 installments. The first payment is immediate and then the annual payment thereafter for 29 more payments. The payments increase by 5% each year.
Your assignment is to:
Calculate the increasing annuity payments using the Grand Prize of $65,000,000
Calculate the breakeven discount rate that would make you indifferent between the annuity and the upfront cash value option
Calculate the expected value of a $2 ticket for the drawing with the payout describe above.
Calculate the Grand Prize amount that creates an expected value of $2 for a purchased ticket.
Create all of this in an Excel spreadsheet.
Understandable Statistics Concepts And Methods
ISBN: 9780618986927
9th Edition
Authors: Charles Henry Brase, Corrinne Pellillo Brase