You have been given a choice between two retirement policies as described below:
Policy A: You will recieve equal annual payments of $30,000 in 20 years
Policy B: You will recieve one lump sum of $400,000 now.
1) At what interest rate would you be indifferent in choosing between the two policies?
2) At what interest rate, will you choose Policy A? At whar interest rate will you choose policy B?
3) If you expect to be able to earn 6% annually on your investment over the next 20 years, which policy should you take? why? show your calcualtions.