Can someone help me out with my math?

Reply #11

KY Floyd — Fri, 10 Aug 2007 07:40:15 GMT

No, that's not what I said.

If the annuity payments were all the same then it would represent roughly 6% on an investment of $61 million, but the payments aren't equal. The payments for the first several years are smaller, so that there is more principal invested than if the payments were equal. Because there is more principal the total of the payments is generated with a lower interest rate. As a SWAG I'd put it at about 5.2%.

If you didn't have to pay income tax on the lump sum you c... [ More ]

Reply #10

time*treat — Thu, 09 Aug 2007 18:51:36 GMT

As best as can be calculated (reasonably) quickly, yes. 6% doesn't even cover the increase in the cost of milk or gas, etc. I'd take the cash, now. It's my money. Use it when I need it.

Reply #9

whitmansm2 — Thu, 09 Aug 2007 16:01:33 GMT

WOW! Thank you so much for the information!!!

So you're saying that by getting the annuity I would only be getting 5.96% (roughly). Which I can make more if I take the cash value and invest it myself.

Did I get that right?

THANK YOU SO MUCH!!! This is making more sense.

Reply #8

KY Floyd — Thu, 09 Aug 2007 15:27:29 GMT

That's the formula for the future value of a series of payments, and calculates the total of the payments and the interest earned during the investment period. If you planned to invest each payment from the annuity at a fixed rate of interest that formula would tell you how much you would have accumulated after any given number of payments, if you hadn't withdrawn anything during that period.

By taking the annuity instead of cash you're essentially loaning the principal and collecting mortg... [ More ]

Reply #7

Raven62 — Thu, 09 Aug 2007 13:09:23 GMT

Annuity

FV = PMT * [ ( ( 1 + i )N - 1 ) / i ]

FV = future value (maturity value)

PMT = payment per period

i = interest rate in percent per period

N = number of periods

Plug in the known values and solve for the unknown value. (In your case: i

Reply #6

time*treat — Thu, 09 Aug 2007 12:46:06 GMT

A decent college econ book will have a lookup table for this (Interest and Annuity Tables for Compounding).

If you dig around in Excel or Calc (Financial subcats), the formulas are there, too.

There are most likely some plug-in pages on the web, too.

Reply #5

KY Floyd — Thu, 09 Aug 2007 05:36:48 GMT

Your result is definitely wrong, but it's more than a simple math error. If you invested 141 million at 2.5% the annual earnings would be $3.525 million, so I'm guessing you got the 2.5% figure by starting with the 141 million and an annual income of $3.5 million then rounding the result to 2.5 (3.5/141=.0248). Since the annuity is from an investment of $65.6 million, a $3.5 million pre-tax income is what you'd get from a rate of 5.33% if you didn't collect any of the principal.

Here's... [ More ]

Reply #4

whitmansm2 — Thu, 09 Aug 2007 02:51:09 GMT

lol Now I KNOW I'm not asking my question right! LOL

Sorry! Let me try again.

To get annuity...they take the cash option....and put it in a bond....right? You're being paid the dividends every year in an annuity....right? I'm wondering if my cash option is 65.6 and they put it into a bond so I can get annuity and end up with 141mil, then what interest rate am I getting if my dividends are 3.5mil?

My math...which again is bad...showed that with the cash option of 65.6mil....and the e... [ More ]

Reply #3

RJOh — Thu, 09 Aug 2007 02:32:11 GMT

If you have your savings in a CD that paying 2.5%, banks will automatically renew it with the lower rate instead of the newer improved rate of 4% or better unless you renew it yourself. You are responsible for getting the best rates for your savings.

Reply #2

whitmansm2 — Thu, 09 Aug 2007 02:06:57 GMT

I looked there and that's where I got some of my information....I do appreciate you responding! But my question...to break it down...is what is my percent rate? How much am I making off of the cash prize if I take the annuity? What's my return?

Does that make sense

Reply #1

JADELottery — Thu, 09 Aug 2007 02:03:03 GMT

go here

http://www.usamega.com/powerball-jackpot.htm

Can someone help me out with my math?

whitmansm2 — Thu, 09 Aug 2007 02:00:36 GMT

Like most people I wanted to take the lump sum of any major jackpot win. I started thinking about it the other day, and thought that I was just not thinking things through and thats the last thing I want to do with that huge some of money! So, I was thinking that maybe annuity is better. I know everyone has their opinions on which one is better...but I want to know from a mathmatical point of view. (Don't worry...I understand too, that no one can give me better advice than a financial adviso... [ More ]