Randy had two term policies to compare, with costs as shown below. Calculate the NPV at a

Question:

Randy had two term policies to compare, with costs as shown below. Calculate the NPV at a 6 percent after-tax discount rate and the IRR. Which one should she select and why?

Years ___________ A _____________ B

1 .................... $225 ................ $300

2 .................... $275 ................ $310

3 .................... $350 ................ $320

4 .................... $400 ................ $330

5 .................... $500 ................ $340

Discount Rate
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal...