Question

You have just won the multi-state lottery jackpot of $500,000,000! you have the option of receiving a check for $25,000,000 every year at the end of the next 20 years. the lottery commission also allows you the option of receiving a one-time payment of $311,555,000 when you turn in the winning ticket. what is the approximate interest rate that the lottery commission is using to determine the one-time payment?

Answer 1

(10,000,000) / (20) = 500,000

(10,000,000) * (0.069) = 690,000 in taxes.

So (10,000,000) - (690,000) = 9,310,000 in a lump sum.

In 20 payments it would be $500,000 minus the taxes.

($500,000) - [(690,000)/(20)]

($500,000) - [$34,500] = $465,500

One lump sum would be $9,310,00. If they don't charge you taxes if you get the 20 payments per year, you would get $500,000. If you're charged taxes you'd get $465,500 per year.