Answer to Question #95598 in Financial Math for may

Question

A lottery offers two options for the prize.

Option A: $1000 a week for life.

Option B: $600 000 in one lump sum.

The current expected rate of return for large investment is 3%/a, compounded monthly.

a. Which option would the winner choose if s/he expects to live for another 50 years?
b. At what point in time is Option A better than Option B?

Answer 1

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