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Powerball's Cash Option

Topic closed. 5 replies. Last post 14 years ago by CASH Only.

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United States
Member #434
June 30, 2002
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Posted: May 10, 2003, 7:57 am - IP Logged

Anyone notice that Powerball's initial Cash Option has decreased for this next drawing to $5.5 Million? Previous starting jackpots have been at $6 Million ever since they switched to the 30 year annuity. Since interest rates haven't changed, I wonder why the decrease?

    Todd's avatar - Cylon 2.gif
    Chief Bottle Washer
    New Jersey
    United States
    Member #1
    May 31, 2000
    23262 Posts
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    Posted: May 10, 2003, 8:16 am - IP Logged

    I've posted about this subject before.  Don't look at it that way - the cash value is not determined based on the annuity value, it's the other way around.  In this case, they determine how much cash is necessary in order to generate an annuity jackpot of $10 million.  The fact that the cash value is less indicates that the returns on the bonds (or whatever they purchase) is higher.  Less cash is necessary to generate the $10 million 30-payment jackpot.

    That is also why games with a shorter annuity period (e.g., Mega Millions with 26 payments) tend to have higher cash values.  There are fewer years to generate interest accumulation, which means more cash is necessary to generate the same annuity value.  If Powerball and Mega Millions each have the exact same annuity-value jackpot, the Mega Millions cash value will always be higher.

     

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      United States
      Member #379
      June 5, 2002
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      Posted: May 10, 2003, 8:23 am - IP Logged
      Todd:

      Yet, the Super-6 game in PA (same 26-payment annuity as MM) offer a 50% cash value, vs almost 60% in MM.


        United States
        Member #379
        June 5, 2002
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        Posted: May 10, 2003, 9:44 pm - IP Logged
        Powerball (Wed 5/14) $12 million/$6.7m lump sum (cash value about 56% of annuity.)

        Hot Lotto $1,350,000.


          United States
          Member #379
          June 5, 2002
          11296 Posts
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          Posted: May 19, 2003, 12:28 pm - IP Logged
          If there were deflation, could the cash value be the same (or HIGHER) than the annuity value?

          I heard of at least one bank in Japan that was paying "negative" interest (in effect, you paid the bank to keep your money in it).


            United States
            Member #379
            June 5, 2002
            11296 Posts
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            Posted: May 22, 2003, 5:43 am - IP Logged
            Saturday (5/24) jackpots:

            Powerball $29 million;   Hot Lotto $1.5 million.