An annuity contract will pay you $4,000 a year (end of year)for the next three years.Or,you can choose to receive $12,610 at the end of the third.Assuming that you can earn 8% on investments,you should
A)choose to receive the $4,000 annuity payments.
B)choose to receive the $12,610 payment.
C)flip a coin to make the choice;each is equally attractive.
D)flip a coin to make the choice;each is equally unattractive.

Question

Quizplus · Accepted Answer

The present value of the annuity payments ($4,000 per year for 3 years at 8%) is higher than the present value of the $12,610 lump sum received at the end of the third year.

An Annuity Contract Will Pay You $4,000 a Year (End