math urgent
posted by sarah .
The state lottery (which has a 6% lottery tax) offers to pay winnings in 25 annual payments or one lump sum,
sometimes called a cashout option. This week’s lottery has a jackpot of $30 million and
a cashout value of $18.2 million. Granted that the odds are highly unlikely one would
win, which option should a winner take—annual payments or a lump sum? Why?
Show work and formulas used.
These are the formulas I am choosing between:
annuity: a1=(1r^n)/(1r) where a1 is the original amount (30M or 18.2M), r is the rate (.06), and n is the number of years (25).
or future value: FV=PV(1+i/n)^nt where PV is the present value (30M or 18.2M), i is the rate (.06), n is the number of compounds per year, and t is the time (25).

math urgent 
Reiny
I saw this question when you posted it yesterday. I did not answer it since it wasn't quite clearly stated. Is the 30 million split into 25 equal annual payments?? I will assume that.
In that case we are simply finding the present value of those payments
payment = 30 million/25 = 1200000
r = .06
n = 25
PV = 1200000( 1  1.06^25)/.06
= $15,340,027.37
So I would take the cashout value of 18.2 million
Respond to this Question
Similar Questions

math
6. A lottery offers two options for the prize. Option A: $1000 a week for life Option B: $ 600 000 in one lump sum. The current expected rate of return for large investment is 7%/a, compounded weekly. a. Which option would the winner … 
math
6. A lottery offers two options for the prize. Option A: $1000 a week for life Option B: $ 600 000 in one lump sum. The current expected rate of return for large investment is 7%/a, compounded weekly. a. Which option would the winner … 
tax accounting
bruce wilson won 2 million in the state lottery. the lottery pays out the prize money in 20 annual installments of 100,000 each. After receiving three 100,000 installments, bruce sold the remaining 1.7 million of payments for 1 million. … 
Finance
Sarah just won a $3,000,000.00 lottery. According to the lottery they will pay her a lump sum of $500,000.00 on October 1, 2012 and the balance in equal annual installments for 10 years. Assuming that you are the director of the lottery, … 
Finance
Suppose the chances of winning the lottery are 1 in 14 million with the earnings of $20 million to the lucky winner. A ticket costs $1. However, the winnings are paid over 20 years, with the first $1 million payment occurring immediately. … 
math!
Imagine that you are doing research for a term paper in your English class and you have chosen the topic of “expected winnings of a lottery.” You find the following information for your state’s lottery: Prize Probability Jackpot … 
English
In the short story 'The Lottery,' should I capitalize lottery when writing about it: EX The winnings of the Lottery were undesired by all townsfolk. 
math
A lottery offers two options for the prize. (7) Option A: $1000 a week for life. Option B: $600 000 in one lump sum. If you choose Option B, you have the opportunity to place the winnings into an investment that also makes regular … 
math ( Discrete Functions)
lottery offers two options for the prize. (7) Option A: $1000 a week for life. Option B: $600 000 in one lump sum. If you choose Option B, you have the opportunity to place the winnings into an investment that also makes regular payments, … 
math
The state lottery (which has a 6% lottery tax) offers to pay winnings in 25 annual payments or one lump sum, sometimes called a cashout option. This week’s lottery has a jackpot of $30 million and a cashout value of $18.2 million. …