Select best option in insurance policy

Reference no: EM1349783

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.

Reference no: EM1349783

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