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You have been offered the choice of a payment of $1,000 per year until you actuarially expire (pass away) or a single lump sum payment

You have been offered the choice of a payment of $1,000 per year until you actuarially expire (pass away) or a single lump sum payment of $5,000.

If your required rate of return is 25%, which option would you accept?

Answer

a. $5,000 today

b. An annual payment of $4,000.

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