Question

Julia Baker died, leaving to her husband Henry an insurance policy contract that provides that the beneficiary (Henry) can choose any one of the following four options. Money is worth 2.50% per quarter, compounded quarterly. Compute Present value if:

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(a) Your answer is correct. (a) $56,770 immediate cash. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)

(b) $4,200 every 3 months payable at the end of each quarter for 5 years. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)

(c) $19,800 immediate cash and $1,980 every 3 months for 10 years, payable at the beginning of each 3-month period. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)

(d) $4,200 every 3 months for 3 years and $1,640 each quarter for the following 25 quarters, all payments payable at the end of each quarter. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)

Which option would you recommend that Henry exercise?

Answer 1