Earlier this year, a Tennessee warehouse worker named John Robinson won one-thir

Question

Earlier this year, a Tennessee warehouse worker named John Robinson won one-third of a $1.6 billion Powerball jackpot. His share was $533 million. He had a choice between taking the $533 million in 30 equal annual payments of $17.77 million or an immediate lump sum of $328 million. John chose the lump sum. What discount rate did he apply in deciding to take the lump sum payment? Put differently, what interest rate would a person have to earn on $328 million to be able to extract $17.77 million at end of the year for 30 years (and have nothing left at the end of that time period)?

Explanation / Answer

RATE(30,17.77,-328,0)=3.47%

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