Your Client Has the Following Choices for an Insurance Benefit

question 6

Short Answer

Your client has the following choices for an insurance benefit: She can receive $2,000 at the end of each year for the next five years or one "lump" sum today. If the current interest rate is 4.5% compounded annually, what lump payment today is equivalent to the five payments? (Taken from CIFP course materials.)

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Definitions:

Nasty Stimulus

An unpleasant or harmful stimulus that can provoke negative reactions or behaviors.

Pleasant Stimulus

Any input or event that causes a positive emotional response, such as happiness or satisfaction.

Rewards

Benefits, both material and immaterial, given to employees or individuals in recognition of their work or behavior.

Reinforcers

Any stimulus or event that increases the likelihood of the repetition of the behavior that it follows.