You Are Considering Two Insurance Settlement Offers

question 16

Multiple Choice

You are considering two insurance settlement offers. The first offer includes annual payments of $5,000,$7,500,and $10,000 over the next three years,respectively. The other offer is the payment of one lump sum amount today. You are trying to decide which offer to accept given the fact that your discount rate is 5%. What is the minimum amount that you will accept today if you are to select the lump sum offer?

• A) $19,877.67
• B) $20,203.00
• C) $21,213.15
• D) $23,387.50
• E) $24,556.88