You are the beneficiary of a life insurance policy. The insurance company inform

Question

You are the beneficiary of a life insurance policy. The insurance company informs you that you have two options for receiving the insurance proceeds. You can receive a lump sum of $200,000 today or receive payments of $1,400 a month for 20 years. You can earn 6 percent on your money. Which option should you take and why? Answer a. You should accept the $200,000 because the payments are only worth $189,311 to you today. b. You should accept the payments because they are worth $209,414 to you today. c. You should accept the payments because they are worth $247,800 to you today. d. You should accept the $200,000 because the payments are only worth $195,413 to you today.

Explanation / Answer

ans: d

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