Has anyone noticed the change?

Reply #14

KY Floyd — Mon, 22 Feb 2016 02:36:58 GMT

The information about inflation that we get from the government is real info based on what's actually going on. The annual increases in annuity payments for various lottery games are a fairy arbitrary amount. It's possible that the 5% figure was chosen in the expectation that future payments will have at least the same value as current payments, but that's not the real reason for the increases.

The lotteries have exactly one primary goal, and that's maximizing revenue for the state(s). By adv... [ More ]

Reply #13

mathhead — Mon, 22 Feb 2016 01:14:43 GMT

ArizonaDream wrote: The difference I think you are missing, is that Texas (and Illinois) bump up the the lotto annuity jackpot by a fixed 250,000 with every rollover, while the MM/PB jackpot goes up by an amount directly tied to sales .

I did not think we are debating per se; just trying to get our facts straight. I am happy to have my mistakes pointed out.

I don't know anything about Illinois. And I have not looked at MM rules recently.

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It should be self-evident that the Lotto... [ More ]

Reply #12

mathhead — Sun, 21 Feb 2016 21:03:51 GMT

Savagegoose wrote: I assume the %5 increase in annuity values is to defeat inflation. so we can assume the states %5 is the rate iof inflation, not the sub 2% the gov puts out .

I don't think we can make any such assumptions. The 5% increase for PB and MM annuities is specific to those games. It is very different for Calif's SuperLotto, for example. I don't know what it is for Lotto Texas.

Reply #11

savagegoose — Sun, 21 Feb 2016 20:33:25 GMT

thanks guys ;Arizona and math head, I now have a clearer view on how things are worked out. And yeah the negative interest rates comment was a little tongue in cheek. Im sure its not a place we want to go , negative rates.

I assume the %5 increase in annuity values is to defeat inflation. so we can assume the states %5 is the rate iof inflation, not the sub 2% the gov puts out.

Reply #10

ArizonaDream — Sun, 21 Feb 2016 20:16:17 GMT

The difference I think you are missing, is that Texas (and Illinois) bump up the the lotto annuity jackpot by a fixed 250,000 with every rollover, while the MM/PB jackpot goes up by an amount directly tied to sales.

And that'll be the last from me, as I don't actually care enough to debate further.

Reply #9

mathhead — Sun, 21 Feb 2016 20:01:31 GMT

ArizonaDream wrote: I'm going to copy what someone else posted in another thread .... .

And I believe that quote supports my explanation. If you perceive a difference, I probably did not explain things clearly enough. Let me know the specific difference that you perceive, and I will try to explain it better.

Nevertheless, I had anticipated some push-back, and I was going to add a PS to clarify that quote.

The quote is probably accurate insofar as what the Lotto Texas website says. But w... [ More ]

Reply #8

mathhead — Sun, 21 Feb 2016 19:18:54 GMT

Savagegoose wrote: this will get interesting when they go to negative interest rates, thus making the cash value higher than the annuity .

I doubt that because I don't believe the IRR over 29 years would be negative. For example, if 10 years of negative rates (a long time, IMHO) are followed by 19 years of positive rates, the IRR can be positive, and the annuity factor can be larger than 1.

Of course, we can construct examples (albeit unlikely, IMHO) where the IRR is indeed negative. But m... [ More ]

Reply #7

ArizonaDream — Sun, 21 Feb 2016 19:18:35 GMT

I'm going to copy what someone else posted in another thread -

It's important to understand what happens when a Lotto Texas jackpot is won. If the jackpot winner has chosen 30 Annual Payments, Texas Lottery officials provide the Texas Treasury Operations Division of the State Comptroller's Office with the jackpot amount. The Division submits a request for bids from previously approved investment firms. The contract is awarded to the investment firm that will provide the jackpot amount, paid o... [ More ]

Reply #6

mathhead — Sun, 21 Feb 2016 19:05:35 GMT

Actually, both the PB and Lotto Texas calculations are the same, procedure-wise. (The details like rates of return probably differ, of course.)

From the Lotto Texas procedures: The interest factor is calculated by dividing the advertised jackpot by the estimated cost, including the initial payment required, to fund an investment stream that would yield the total advertised jackpot over a 30-year period . The estimated cost is based on investment information from appropriate financial institut... [ More ]

Reply #5

ArizonaDream — Sun, 21 Feb 2016 18:22:07 GMT

The confusion seems to come from the state lotteries calculating it one way and PB/MM calculating it another way.

Some state lotteries, like Texas which was discussed in that other thread, start with a fixed annuity value and work backwards from that based on interest rates available and come up with a cash value. MM and PB, on the other hand, start with a cash value based on predicted/actual sales and then calculate how much an annuity would earn in interest to advertise an annuity value.

Reply #4

mathhead — Sun, 21 Feb 2016 17:42:33 GMT

Meatman wrote: Why not keep it at the past 62% and just lower the annuity amount?

The interest rate is the IRR of the returns from a ladder of investments over 29 years (30 payments, the first being immediate) that return the required annual payments. The actual rate of return of each step of the ladder might vary; the IRR is the average rate of return.

The required annual payment increases 5% each year.

From this, the MUSL calculates an annuity factor (AF). In Excel:

=FV(5%,30,-1,... [ More ]

Reply #3

savagegoose — Sun, 21 Feb 2016 17:38:26 GMT

Im not sure how it works nowadays. earlier post says its done by auctioning the annuity payments to the lowest bidder. so my information is wrong. im working on how i thought it worked. im still trying to get my head around it actually works now

Reply #2

TheMeatman2005 — Sun, 21 Feb 2016 14:27:12 GMT

OK, so lower interest rates means that more cash is needed to generate the annuity jackpot amount.

Why not keep it at the past 62% and just lower the annuity amount

Reply #1

savagegoose — Sun, 21 Feb 2016 14:12:02 GMT

its the time value of money. ie interest rates. if the interest rates where as high as %6 then the cash could be lower. this will get interesting when they go to negative interest rates, thus making the cash value higher than the annuity

Has anyone noticed the change?

TheMeatman2005 — Sun, 21 Feb 2016 13:16:05 GMT

The Powerball cash value used to be approximately 62% of the annuity jackpot amount.

Now, it has been about 66% of the annuity jackpot amount.

Has anyone else noticed that and know the reason why the cash value percentage would change