In 2004 Geraldine Williams won a $294 million MegaMillions lottery. She had the
ID: 1222046 • Letter: I
Question
In 2004 Geraldine Williams won a $294 million MegaMillions lottery. She had the option of receiving her winnings in 26 payments of $11.3 million or an immediate payoff of $168 million. The calculations in the table below show that $11.3 million in 26 annual installments has a present value of $168 million (at a 4.47 percent rate of interest).
Assuming Ms. Williams took the immediate payoff, how much interest accrued each day on the cash payoff of the MegaMillions jackpot?
Instructions: Enter your response rounded to two decimal places.
$ ________
the Future Future Payment
($ millions) Present Value
($ millions) 0 $ 11.3 $ 11.30 1 11.3 10.82 2 11.3 10.35 3 11.3 9.91 4 11.3 9.49 5 11.3 8.04 * * * * * * * * * 25 11.3 3.79 $294.0 $168.0 Note: The general formula for computing present value is
, where r is the prevailing rate.
Explanation / Answer
ANNUAL INTEREST WILL BE EQUAL TO 4.47% P.A. ON 168,000,000
= (4.47 * 168000000) / 100 = 7509599.99 OR 7509600
DAILY INTEREST WILL BE EQUAL TO 7509600 / 366 = $ 20518.03
DAYS HAS BEEN TAKEN TO 366 SINCE IT IS LEAP YEAR.
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