What is the break-even personal discount rate

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With the end of the Cold War, the U.S. government decided to "downsize" the military. Along with a pink slip, the government offered ex-military personnel their choice of $8,000 a year for 30 years or a lump-sum payment of $50,000 immediately. The lump-sum option was chosen by 92% of enlisted personnel and 51% of officers (Warner and Pleeter, 2001). What is the break-even personal discount rate at which someone would be indifferent between the two options? What can you conclude about the personal discount rates of the enlisted personnel and officers?

Reference no: EM131344986

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