Financial Options - Received Payments
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You are the beneficiary of a life insurance policy. The insurance company informs you that you have two options for receiving the insurance proceeds. You can receive a lump sum of $200,000 today or receive payments of $1,400 a month for 20 years. You can earn 6 percent on your money. Which option should you take and why?
Question options:
1) You should accept the payments because they are worth $336,000 to you today.
2) You should accept the $200,000 because the payments are only worth $195,413 to you today.
3) You should accept the $200,000 because the payments are only worth $189,311 to you today.
4) You should accept the payments because they are worth $209,414 to you today.
5) You should accept the payments because they are worth $247,800 to you today.
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Solution Summary
This solution goes over financial options with regards to life insurance policies. The solution is 74 words in length, and provides clear calculations as to which is the best financial option.
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We calculate the present value of the two options and take the one which has a higher present ...
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