P6-5 Julia Baker died, leaving to her husband Brent an insurance policy contract that provides that the beneficiary (Brent) can choose any one of the following four options. (a) $55,000 immediate cash.
(b) $4,000 every 3 months payable at the end of each quarter for 5 years. (c) $18,000 immediate cash and $1,800 every 3 months for 10 years, payable at the beginning of each 3-month period. (d) $4,000 every 3 months for 3 years and $1,500 each quarter for the following 25 quarters, all payments payable at the end of each quarter.
Instructions
If money is worth 2½% per quarter, compounded quarterly, which option would you recommend that Brent exercise?
**TUTORIAL PREVIEW**
(b) Time diagram: i = 2^{1}/_{2}% per quarter
PV – OA = R = |