Max has just won some money on a game show! He has the option to take a lump sum payment of $500,000 now or get paid an annuity of $4,900 per month for the next 10 years. Assuming the growth rate of the economy is 2.9% compounding annually over the next 10 years, which is the better deal for Max and by how much?

Lump Sum: by $77,462.75
Lump Sum: by $4,145.41
Annuity: by $88,000.00
Annuity: by $4,145.41

Question

Max has just won some money on a game show! He has the option to take a lump sum payment of $500,000 now or get paid an annuity of $4,900 per month for the next 10 years. Assuming the growth rate of the economy is 2.9% compounding annually over the next 10 years, which is the better deal for Max and by how much?

 Lump Sum: by $77,462.75
 Lump Sum: by $4,145.41
 Annuity: by $88,000.00
 Annuity: by $4,145.41

anonymous · Answer

FV = P((1+r/n)^(n*t) - 1 )/( r/n ) <- use this ! I'm taking the same course !