Your subscription to Jogger's World Monthly is about to run out and you have the choice of renewing it by sending in the $10 a year regular rate or of getting a lifetime subscription to the magazine by paying $100.Your opportunity cost is 7 percent.How many years would you have to live to make the lifetime subscription the better buy? Payments for the regular subscription are made at the beginning of each year.(Round up if necessary to obtain a whole number of years. )
A) 15 years
B) 10 years
C) 18 years
D) 7 years
E) 8 years.

Question

Quizplus · Accepted Answer

The lifetime subscription is the better buy if you live more than 14.29 years. (PV of lifetime subscription = $100; PV of annual subscription = $10/0.07 = $142.86)

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