Recall the Application about opting for a lump sum of $500,000 for your retirement or $35,000 per year for the rest of your life to answer the following question(s).
-This Application addresses the economic concept of
A) procyclical investment.
B) the multiplier-accelerator model.
C) financial intermediaries.
D) present value.

Question

Quizplus · Accepted Answer

This application is related to the concept of present value, which involves calculating the value of an amount of money in the present, based on projected future income and interest rates. The decision between taking a lump sum or an annuity for retirement is a classic example of present value calculations. In this case, the better choice depends on the interest rate used to calculate the present value of the annuity payments. If the interest rate is higher than the rate used to discount the lump sum, then the annuity payments would be worth more in present value terms, and vice versa. However, assuming similar interest rates, the lump sum is usually the better choice, as it provides more flexibility and control over the money.

Recall the Application About Opting for a Lump Sum of $500,000