Marilyn has just won some money on a game show! She has the option to take a lump sum payment of $350,000 now or get paid an annuity of $3,200 at the beginning of each month for the next 10 years. Assuming the growth rate of the economy is 1.8% compounding annually over the next 10 years, which is the better deal for Marilyn and by how much?

Question

anonymous · Answer

wow has no one helped you with this yet?

anonymous · Answer

ok i will attempt to do this and after i will get on to my own homework. 

so far this looks like an interest problem
ok Option one is just a flat out 350,000

now for the next one we have to use the compound interest formula

anonymous · Answer

A = 3200(1 + 0.018/10)^10
3200(1 + 0.0018)^10
3200 (1.0018)^10
3200 (1.018)
3257.6
ok so now we do 3200 (10 = 320,000 + 3257.6 (the interest added to the salary over the tens years)
323257.6
so the first option is better.