In: Finance
You are advising a client on the decision of which pension she should take. Option A: A lump sum payment of $210,000 five years from today. Option B: Equal payments of $18,000 every year for 15 years with the first payment five years from today. Assume the client will make her decision solely on the time value of money. Using an interest rate or 3.5%, which option is preferable?
Option B is preferable, because the PV of B to your client today is $174,552. |
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Option A is preferable, because the FV of A to your client is $339,925. |
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Option B is preferable, because the PV of B to your client today is $180,661. |
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Option A is preferable, because the PV of A to your client today is $176,814. |