Question: 9. You have been given a choice between two retirement policies. Policy A: you will receive equal annual payments of $43,500 for 20 years, and

9. You have been given a choice between two retirement policies. Policy A: you will receive equal annual payments of $43,500 for 20 years, and Policy B: you will receive one lump-sum of $500,000 now. If you expect to be able to earn 5% annually on your investment over the next 20 years, which alternative should you take?

  1. Policy A, because it has a higher present value
  2. Policy B, because it has a higher present value
  3. Policy A, because it has a lower present value
  4. Policy B, because it has a lower present value.

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