After completing a long and successful career as senior vice president for a large bank, you are preparing for retirement. After visiting the human resources office, you have found that you have several retirement options:
(1) You can receive an immediate cash payment of $1 million,
(2) You can receive $60,000 per year for life (your remaining life expectancy is 20 years), or
(3) You can receive $50,000 per year for 10 years and then $70,000 per year for life (this option is intended to give you some protection against inflation). You have determined that you can earn 8 percent on your investments. Which option do you prefer and why?