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Suppose you were offered the following alternatives: (a) a 3-year annuity with payments of $1000 at the end of each year or (b) a lump
Suppose you were offered the following alternatives: (a) a 3-year annuity with payments of $1000 at the end of each year or (b) a lump sum payment today. You have no need for the money during the next 3 years, so if you accept the annuity you would simply deposit the payments in a savings account paying 4 percent interest. How large must the lump sum payment be to make it equivalent to the annuity?
Question 8 options:
| $1,216.65 |
| $1,124.86 |
| $3,717.10 |
| $2,775.10 |
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