10.

Diana's insurance company offered her two options for settling an insurance claim. Option A will provide her with $1,000 a month for the next 10 years. Option B gives her $85,000 as a lump sum payment today. The applicable discount rate is 8.0 percent compounded monthly. Which option should Diana select, and why, if she is only concerned with the financial aspects of the offers? Assume in Option A, the monthly payment is made at the end of the month. (Multiple Choice)

Question 10 options:

	Option B: It has a larger value today.
	Option A: It pays a larger total amount.
	Option A: It pays for a longer term.
	Option A: It provides a larger monthly payment.
	Option A: It provides monthly payments, which are more convenient.

12

Rahul is scheduled to receive annual payments of $3,600 for each of the next 12 years. The discount rate is 6.6 percent compounded annually. What is the difference in the present value if these payments are paid at the beginning of each year rather than at the end of each year? (Multiple Choice)

Question 12 options:

	$1,928.08
	$2,002.12
	$1,811.92
	$1,700.10
	$1,886.43

15

Werden's Workshop invested $225,000 today to help fund future projects. How much additional money will the firm have three years from now if it can earn an annual interest rate of 4.5 percent rather than 4 percent? Assume annual compounding. (Multiple Choice)

Question 15 options:

	$3,601.48
	$3,689.68
	$3,667.98
	$3,632.88
	$3,711.08