Question
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
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%, compounded monthly, which option should you take and why?
a. Accept the lump sum because the payments are only worth $49,540.40 today.
b. Accept the monthly payments because they are worth $51,523.74 today.
c. Accept the payments because they are worth $53,737.08 today.
d. Accept the $50,000 because the payments are worth only $49,757.69 today.
e. Accept neither because the US dollar is worthless.
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