Question

Your rich uncle​ dies, leaving you a life insurance policy worth $100,000. The insurance company also offers you an option to receive $8,550 per year for ​years, with the first payment due today.

Part 2
You should choose the immediate payout if the interest rate is greater than

Answer 1

To determine whether you should choose the immediate payout or the annual payments, you need to compare the present value of the annuity to the value of the immediate payout.

Step-by-step explanation:

To determine whether you should choose the immediate payout or the annual payments, you need to compare the present value of the annuity to the value of the immediate payout. The present value of the annuity can be calculated using the formula:

PV = C * (1 - (1 + r)^(-n)) / r

Where PV is the present value, C is the annual payment, r is the interest rate, and n is the number of years. If the interest rate is greater than the calculated present value, you should choose the immediate payout.

In this case, the annual payment is $8,550 and the number of years is not specified. Without this information, it is not possible to determine the exact interest rate at which the immediate payout becomes the better option.