Problem:
A person is about to retire and must choose between three retirement plan options. One provides $55,000 per year for the renaubder of his life. Another provides 85% of this amount and increases by 5% each year. A third option gives him a $400,000 lump-sum settlement. If his remaining life expectancy is twelve years, the prime interest rate is 8% and he can ignore taxes, which should he choose?