Develop a choice table for interest rates

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Reference no: EM131808983

The Financial Advisor is a weekly column in the local newspaper. Assume you must answer the following question. "I recently retired at age 65, and I have a tax-free retirement annuity coming due soon. I have three options. I can receive (A) $30,976 now, (B) $359.60 per month for the rest of my life (assume 20 years), or (C) $513.80 per month for the next 10 years. What should I do?" Ignore the timing of the monthly cash flows and assume that the payments are received at the end of year. Contributed by D. P. Loucks, Cornell University

(a) Develop a choice table for interest rates from 0% to 50%. (You do not know what the reader's interest rate is.)

(b) If i = 9%, use an incremental rate of return analysis to recommend which option should be chosen.

Reference no: EM131808983

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