You have a choice between receiving (1) A $50,000 payment today, (2) A $7,500 annuity for the

Question:

You have a choice between receiving

(1) A $50,000 payment today,

(2) A $7,500 annuity for the next 10 years and a lump-sum amount of $20,000 at the end of the10th year. If money is worth 10%, which option is the most attractive?

Annuity
An annuity is a series of equal payment made at equal intervals during a period of time. In other words annuity is a contract between insurer and insurance company in which insurer make a lump-sum payment or a series of payment and, in return,...