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28 Sep 2019
Linda's husband has just passed away and she is entitled to$100,000 insurance benefit. She chooses to receive the benefitannually over 15 payments, with the first payment immediately.Suppose the interest rate that her benefit gets is 4%, but theinsurance company can actually invest the money at 5%. How much isthe insurance company making (in terms of present value) by payingout the benefit in installments instead of in a lump sum?
Linda's husband has just passed away and she is entitled to$100,000 insurance benefit. She chooses to receive the benefitannually over 15 payments, with the first payment immediately.Suppose the interest rate that her benefit gets is 4%, but theinsurance company can actually invest the money at 5%. How much isthe insurance company making (in terms of present value) by payingout the benefit in installments instead of in a lump sum?
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Patrina SchowalterLv2
28 Sep 2019