Assignment:

PART 5 (30 points):

Mr. Smith died, leaving an insurance policy to his heir, John Smith. The contract provides that the beneficiary can choose any one of the following four options:

A) $550,000 immediate cash

B) $40,000 every three months, payable at the end of each quarter for five years

C) $180,000 immediate cash and $18,000 every three months for ten years, payable at the beginning of each three-month period

D) $40,000 every three months for three years and $15,000 each quarter for the following twenty-three quarters, all payments payable at the end of each quarter.

John has come to you to ask for assistance and your advice. If money is discounted at a rate of 8% annually, which option would you recommend (in terms of pure value calculation)?

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Assignment: PART 5 (30 points): Mr. Smith died, leaving an insurance policy to his heir, John Smith. The contract provides that the beneficiary can choose any one of the following four options: A) $550,000 immediate cash B) $40,000 every three months, payable at the end of each quarter for five years C) $180,000 immediate cash and $18,000 every three months for ten years, payable at the beginning of each three-month period D) $40,000 every three months for three years and $15,000 each quarter for the following twenty-three quarters, all payments payable at the end of each quarter. John has come to you to ask for assistance and your advice. If money is discounted at a rate of 8% annually, which option would you recommend (in terms of pure value calculation)?