What Are The Odds?

With the Powerball jackpot reaching $500 million, lottery ticket sales are very brisk. So what are the odds of winning? 1 in 175 million. You would have a better chance of randomly predicting the name of a female in the United States (1 in 157 million). While the jackpot is announced at $500 million, it is actually paid over 30 payments with the first payment being made today. If the winner selects the cash option, they will receive "only" $327 million. So, with equal annual payments, what interest rate is being offered? Check for yourself that it is about 3.24 percent. Of course, Powerball payments actually increase at 4 percent per year to keep pace with inflation. Given this growth rate in the payments, what is the nominal interest rate offered on the payments now? Check for yourself that the rate is about 9.82 percent.