Question
6. A lottery offers two options for the prize.
Option A: $1000 a week for life
Option B: $ 600 000 in one lump sum.
The current expected rate of return for large investment is 7%/a, compounded weekly.
a. Which option would the winner choose if s/he expects to live for another 25 years?
b. At what point in time is Option A better than Option B?
Option A: $1000 a week for life
Option B: $ 600 000 in one lump sum.
The current expected rate of return for large investment is 7%/a, compounded weekly.
a. Which option would the winner choose if s/he expects to live for another 25 years?
b. At what point in time is Option A better than Option B?