You have been given the choice between the two retirement policies described below.

Policy A: You will receive equal annual payments of $10,000 starting 35 years from now for 10 years.

Policy B: You will receive one lump sum of $100,000 40 years from now.

If interest rates are 6% pa, which policy would you choose?

Hint:

Policy A: Calculate the PV of the annuity using formula in module 2 and convert it to present value.

Policy B: Calculate PV of lump sum payable in year 40.