winners of the Georgia lotto drawing are given the choice of receiving the winni
ID: 2721086 • Letter: W
Question
winners of the Georgia lotto drawing are given the choice of receiving the winning amount divided equally over 22 years or as a lump-sum cash option amount. The cash option amount is determined by discounting the annual winning payment at 8% over 22years. This week the lottery is worth $2million to a single winner. What would the cash option payment be? winners of the Georgia lotto drawing are given the choice of receiving the winning amount divided equally over 22 years or as a lump-sum cash option amount. The cash option amount is determined by discounting the annual winning payment at 8% over 22years. This week the lottery is worth $2million to a single winner. What would the cash option payment be? winners of the Georgia lotto drawing are given the choice of receiving the winning amount divided equally over 22 years or as a lump-sum cash option amount. The cash option amount is determined by discounting the annual winning payment at 8% over 22years. This week the lottery is worth $2million to a single winner. What would the cash option payment be?Explanation / Answer
The cash optin would be as follows
Annual winning payment = $ 2,000,000 / 22
Annual winning payment = $ 90,909.09
Cash option = $ 90,909.09 / ( 1+0.08)1 + $ 90,909.09 / ( 1+0.08)2 + $ 90,909.09 / ( 1+0.08)3 + $ 90,909.09 / ( 1+0.08)4 + $ 90,909.09 / ( 1+0.08)5 + $ 90,909.09 / ( 1+0.08)6 + $ 90,909.09 / ( 1+0.08)7 + $ 90,909.09 / ( 1+0.08)8 + $ 90,909.09 / ( 1+0.08)9 + $ 90,909.09 / ( 1+0.08)10 + $ 90,909.09 / ( 1+0.08)11 + $ 90,909.09 / ( 1+0.08)12 + $ 90,909.09 / ( 1+0.08)13 + $ 90,909.09 / ( 1+0.08)14 + $ 90,909.09 / ( 1+0.08)15 + $ 90,909.09 / ( 1+0.08)16 + $ 90,909.09 / ( 1+0.08)17 + $ 90,909.09 / ( 1+0.08)18 + $ 90,909.09 / ( 1+0.08)19 + $ 90,909.09 / ( 1+0.08)20 + $ 90,909.09 / ( 1+0.08)21 + $ 90,909.09 / ( 1+0.08)22
The cash option payment would be = $927,340.3236
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