The Mutual Assurance and Life Company is offering an insurance policy under either of the following two terms:
a. Make a series of twelve $1,200 payments at the beginning of each of the next 12 years (the first payment being made today).
b. Make a single lump-sum payment today of $10,000 and receive coverage for the next 12 years.
If you had investment opportunities offering an 8 percent annual return, which alternative would you prefer?