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 at the end of every month for twenty years. You can earn 6% compounded monthly on your money. Which option should you take and why?
a. You should accept the payments because they are worth $209,414 to you today.
b. You should accept the payments because they are worth $247,800 to you today.
c. You should accept the payments because they are worth $336,000 to you today.
d. You should accept the $200,000 because the payments are only worth $189,311 to you today.
e. You should accept the $200,000 because the payments are only worth $195,413 to you today.