You just received an insurance settlement offer related to an accident you had six years ago.The offer gives you a choice of one of the following three offers: $$\begin{array} { l l }
\text { Option A: } & \$ 1,565 \text { a month for } 72 \text { months } \
\text { Option B: } & \$ 1,012 \text { a month for } 10 \text { years } \
\text { Option C: } & \$ 100,000 \text { as a lump sum payment today }
\end{array}$$ You can earn 7.5 percent on your investments.You do not care if you personally receive the funds or if they are paid to your heirs should you die within the settlement period.Which one of the following statements is correct given this information?

Question

You just received an insurance settlement offer related to an accident you had six years ago.The offer gives you a choice of one of the following three offers: $$\begin{array} { l l } 
\text { Option A: } & \$ 1,565 \text { a month for } 72 \text { months } \
\text { Option B: } & \$ 1,012 \text { a month for } 10 \text { years } \
\text { Option C: } & \$ 100,000 \text { as a lump sum payment today }
\end{array}$$ You can earn 7.5 percent on your investments.You do not care if you personally receive the funds or if they are paid to your heirs should you die within the settlement period.Which one of the following statements is correct given this information?

Quizplus · Accepted Answer

Option A has a present value of $90,514.16 at 7.5 percent.Option B has a present value of $85,255.68 at 7.5 percent.Option C has a present value of $100,000.Option C is the best choice since it has the largest present value.

You Just Received an Insurance Settlement Offer Related to an Accident