Powerball jackpot hits $1.55 billion. Why the cash prize dropped $29.7 million last week

The Powerball jackpot has climbed to an estimated $1.55 billion after no one matched the winning numbers Saturday night — and there were some dramatic swings in the cash prize leading up to that drawing.

The winner has two payout options: a lump sum worth $679.8 million or an annuity valued at $1.55 billion. Of course, both options are pretax estimates, and other factors can shift their value.

Last week, the lump sum actually dropped by $29.7 million between Wednesday and Friday even as the headline prize held steady at an estimated $1.4 billion, according to Powerball.

There are a few reasons for that drop, according to J. Bret Toyne, executive director of the Multi-State Lottery Association, which runs Powerball. “It’s a little bit science and a little bit art,” he said.

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Powerball’s estimated lump sum considers projected ticket sales and an “annuity factor,” or the cost to fund the grand prize, Toyne said.

On Fridays, the organization receives nonbinding quotes for bonds to fund prizes and they use interest rates from these quotes to determine the new annuity factor.

Typically, the higher interest rates climb, the bigger jackpot players can expect because “rising interest rates are a tailwind for a lottery annuity,” he said.

But last week, the estimated lump sum dropped from Wednesday to Friday because the weekly annuity factor changed and the amount necessary to fund the jackpot went down, Toyne said.

“As interest rates fluctuate, it changes the value of the annuity and therefore changes the value of the alternative option, which is the lump sum,” said Akshay Khanna, CEO of Jackpot.com, which sells state lottery tickets.

“We’re in such a volatile interest rate environment right now and have been over the past 12 months,” he added.

The next Powerball drawing is Monday at 10:59 p.m. ET, and the sales cutoff is typically one to two hours before the drawing. The odds of winning the jackpot are roughly 1 in 292.2 million.

Monday’s Powerball drawing comes less than three months since a single ticket sold in California won the game’s $1.08 billion jackpot. It’s the 35th Powerball drawing in the current jackpot cycle and the first time the game has seen a back-to-back billion-dollar grand prize.

Meanwhile, the Mega Millions jackpot is back down to $20 million after a winning ticket sold in Texas scored the grand prize of $360 million on Friday. The odds of winning the Mega Millions jackpot are roughly 1 in 302 million.

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