Question
After completing a long and successful career as senior vice president for a large bank, you are preparing for retirement. After visiting the human resources
After completing a long and successful career as senior vice president for a large bank, you are preparing for retirement. After visiting the human resources office, you have found that you have several retirement options to choose from: An immediate cash payment of $1 million. Payment of $90,000 per year for life. Payment of $80,000 per year for 10 years and then $95,000 per year for life (this option is intended to give you some protection against inflation). You believe you can earn 7 percent on your investments and your remaining life expectancy is 20 years. Required: Calculate the present value of each option. Explain which option you prefer and why.
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