Insurance
Your rich uncle dies, leaving you a life insurance policy worth $100,000. The insurance company also offers you another option. Which option should you use? (8 marks with 2 mark per question)
- The other option is an option (an annuity) to receive $150/week for 20 years, with the first payment due in week 1. The discount rate is 5% per year weekly compounding. There are 52 weeks a year.
- The other option is an option (an annuity) to receive $700/month for 20 years, with the first payment due in month 1. The discount rate is 5% per year monthly compounding.
- The other option is an option (an annuity) to receive $150/week for 20 years, with the first payment due in week 1. The discount rate is 4.5% per year weekly compounding. There are 52 weeks a year.
- The other option is an option (an annuity) to receive $700/month for 20 years, with the first payment due in month 1. The discount rate is 5.5% per year monthly compounding.
