17. You are considering two insurance settlement offers. The first offer includes annual payments of $5,000, $7,500, and $10,000 over the next three years, respectively. The other offer is the payment of one lump sum amount today. You are trying to decide which offer to accept given the fact that your discount rate is 5%. What is the minimum amount that you will accept today if you are to select the lump sum offer?
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- Your financial planner offers you two different investment plans. Plan X is a $22, 000 annual perpetuity. Plan Y is an annuity lasting 20 years and an annual payment, $30,000. Both plans will make their first payment one year from today. At what discount rate would you be indifferent between these two plansThe Perpetual Life Insurance Company is trying to sell you an investment policy that will pay you and your heirs $19,500 per year forever. a. If the required return on this investment is 6.1 percent, how much will you pay for the policy? b. Suppose the Perpetual Life Insurance Company told you the policy costs $500,000. At what discount rate would this be a fair deal?You are offered the following two choices. You can either receive Option I: 3 annual payments of $100 each to be received exactly 1, 2, and 3 years from now; Or, Option II: one payment of $269 to be received exactly one year from now. The annual interest rate (as an EAR) that would make you indifferent between receiving the above two options is _______%.
- A retirement plan provides its enrollees with two options. Option 1 provides participants with $50,000 a year over the next 10 years. Option 2 pays a lump sum payment of $300,000 today (and no future payments). Suppose an enrollee takes Option 2. What is the enrollee’s likely discount factor? 3.2% 9.8% 11.1% 5.7%The Eternal Gift Insurance Company is offering you a policy that will pay you and your heirs $10,000 a year forever. The cost of the policy is $285,000. What is the rate of return on this policy if the payment starts today? answer is 3.64%As the beneficiary of a life insurance policy, 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. If you can earn 6 % annual rate on your money, which option should you take and why? Group of answer choices You should accept the payments because they are worth $336,000 to you today. You should accept the payments because they are worth $247,800 to you today. You should accept the $200,000 because the payments are only worth $189,311 to you today. You should accept the payments because they are worth $209,414 to you today. You should accept the $200,000 because the payments are only worth $195,413 to you today.
- 19. You are able to choose between two retirement policies described below. Policy A: Starting 35 years from now, you will receive equal annual payments of $10,000 for 10 years. Policy B: Thirty-five years from now, you will receive one lump-sum payment of $100,000. Which will you choose? Assume the rate of interest is 6 percent. Policy A Value: Policy B Value: I choose:19. You are able to choose between two retirement policies described below.Policy A: Starting 35 years from now, you will receive equal annual payments of $10,000 for 10 years.Policy B: Thirty-five years from now, you will receive one lump-sum payment of $100,000.Which will you choose? Assume the rate of interest is 6 percent.Assume that Social Security promises you $43,000 per year starting when you retire 45 years from today (the first $43,000 will get paid 45 years from now). If your discount rate is 5%, compounded annually, and you plan to live for 17 years after retiring (so that you will receive a total of 18 payments including the first one), what is the value today of Social Security's promise? ... The value today of Social Security's promise is $ the nearest cent.) (Round to
- Assume that Social Security promises you $30,000 per year starting when you retire 45 years from today (the first $30,000 will get paid 45 years from now). If your discount rate is 5%, compounded annually, and you plan to live for 18 years after retiring (so that you will receive a total of 19 payments including the first one), what is the value today of Social Security's promise? The value today of Social Security's promise is $ (Round to the nearest cent.)Suppose you are offered the alternative of receiving either $2,007 at the end of five years or $1,500 today. There is no question that the $2.007 will be paid in full (i.e., there's no risk of nonreceipt). Assuming that the money will not be needed in the next five years, you would deposit the $1.500 in an account that pays i% interest. What value of i would make you indifferent to your choice between $1.500 today and the promise of $2,007 at the end of five years?Assume that Social Security promises you $32,000 per year starting when you retire 45 years from today (the first $32,000 will get paid 45 years from now). If your discount rate is 4%, compounded annually, and you plan to live for 14 years after retiring (so that you will receive a total of 15 payments including the first one), what is the value today of Social Security's promise?