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Suppose and employee of a company is retiring and has the choice of two benefit options under the company pension plan. Option A consists of
Suppose and employee of a company is retiring and has the choice of two benefit options under the company pension plan. Option A consists of a guaranteed payment of $2100 at the end of each month for 20 years. Alternatively, under option B, the employee receives a lump-sum payment equal to the present value of the payments under option A.
(a) Find the sum of payments under option A.
(b) Find the lump-sum payment under option B if it is determined by using an interest rate of 6% compounded monthly. Round the answer to the nearest dollar.
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