Find the type of fault in an annuity?
I can not seem to figure this out. The lottery jackpot is $ 363 million. A lump sum payment gives approximately 50% of the published value. The annuity payment option provides equal installments over 26 years. Can anyone help me solve for rate please? I'm just trying to prove that the 363 million U.S. dollars is not an accurate description of the actual amount to be won.
Let P = payment = 363/26 (in millions) Let r = interest rate Let A = amount received as a lump sum Let n = number of years in payments (ie, 26) = P (1 + r) (1 – (1 + r) ^ -26) / Solution r for r will be something around 6%
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