Your grandmother died recently. She named you as a beneficiary on an insurance contract that will pay you $60,000 immediately. However, the contract gives you the alternative of taking $20,000 a year (end of year) for the next five years. You think that you will earn 6 percent on your investments over this period of time. Given this information, what is the better choice—immediate cash or the extended payout? Explain.
Answer to relevant QuestionsDistinguish between a goal and a dream. You can invest $3,000 annually at the end of each of the next 12 years. You hope to have $60,000 in the investment account by then. What rate of interest must you earn to meet this goal? What is net worth? Does it have anything to do with wealth? Explain two factors that can change net worth from one period to the next. Discuss the process of setting goals. List several general goals that you think will be important to you after graduation and then indicate which specific goals you will use in your annual budgets. Explain how a budget helps achieve effective cash management.
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