3.

MC Qu. 22 You are the beneficiary of a...

You are the beneficiary of a life insurance policy. The insurance company offers two options for receiving the proceeds: a lump sum of $50,000 today or payments of $550 a month for ten years. If you can earn 6 percent, compounded monthly, which option should you take and why?

a) You should accept the lump sum because the payments are only worth $49,540.40 today.

b) You should accept the payments because they are worth $51,523.74 today.

c) You should accept the payments because they are worth $53,737.08 today.

d) You should accept the $50,000 because the payments are only worth $49,757.69 today.

e) You should accept the $50,000 because the payments are only worth $48,808.17 today.