Bob has been in an accident and the other party’s insurance company has offered either a...

Bob has been in an accident and the other party’s insurance company has offered either a one-time payout of $15,000, or a series of payments of $1,100 per year for 15 years. If Bob knows that the current investment rate of interest is 6%, what is the present value of the series of payments? Which should Bob take based on present values?

PV =

FV =

I =

N

Pmt =

Answer: ________

Expert Solution

FV =0
I =6%
N =15
PMT = 1100
PV =PMT*(1-(1+r)^-n)/r =1100*((1-(1+6%)^-15)/6%) =10683.47

Bob should take a one time investment of 15000 and not series of payments of 1100 for 15 years

jeff jeffy answered 2 years ago

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