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Why is the cash option different for MM and PB?

Topic closed. 1 reply. Last post 8 years ago by Prob988.

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Espanola NM
United States
Member #72722
March 25, 2009
133 Posts
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Posted: May 24, 2009, 8:34 pm - IP Logged

Looking at the jackpot analysis for the upcoming PB drawing on May 27th.  It says the estimated jackpot is $222 million w/ a cash option of $113 million.

Going back a couple weeks ago....the Mega Millions game had a estimated jackpot of $225 million.  However, in that case, the cash option was more generous as it was $143 million.

Why the differences?   Any takers?

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    New Jersey
    United States
    Member #21206
    September 4, 2005
    949 Posts
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    Posted: May 24, 2009, 9:55 pm - IP Logged

    Looking at the jackpot analysis for the upcoming PB drawing on May 27th.  It says the estimated jackpot is $222 million w/ a cash option of $113 million.

    Going back a couple weeks ago....the Mega Millions game had a estimated jackpot of $225 million.  However, in that case, the cash option was more generous as it was $143 million.

    Why the differences?   Any takers?

    The annuities are structured differently, with the Powerball annuited being paid in graduated installments - the payment increasing over time.

    Basically the annuity is a worthless concept and is merely marketing.   Powerball messed with the structure to hype its advertising.    You are supposed to think "220 million" but the real prize is not the equivalent of the 220 million Mega Millions jackpot.

    The cash value is what counts, and represents the actual prize for either lottery.

    The real way to think about these prizes is to take the ration of the possible cash winnings to the odds, which is called the "expectation value."     The recent Mega jackpot had an expectation value greater than 0.9, which is equivalent to casino gambling.

    The current Powerball, with longer odds and actually lower real prizes is about 0.74 right now.