Hector has just received an insurance settlement from her accident claim and the insurance company has offered her several alternatives for receiving her settlement. If the rate of interest is an effective annual rate of 10%, Freddy would receive the greatest benefit by selecting which of the following alternatives (circle the letter corresponding to the best option): a) 10 annual cash payments of $50,000 starting two years from today. b) 10 annual cash payments of $37,500 with the first payment to be paid immediately. c) $100,000 immediately and 5 annual payments of $40,000 starting one year from today. d) a one-time cash payment of $250,000 immediately. e) a one-time cash payment of $400,000 to be paid in 5 years. f) a one-time cash payment of $650,000 to be paid in 10 years.

Hector has just received an insurance settlement from her accident claim and the insurance company has offered her several alternatives for receiving her settlement. If the rate of interest is an effective annual rate of 10%, Freddy would receive the greatest benefit by selecting which of the following alternatives (circle the letter corresponding to the best option): a) 10 annual cash payments of $50,000 starting two years from today. b) 10 annual cash payments of $37,500 with the first payment to be paid immediately. c) $100,000 immediately and 5 annual payments of $40,000 starting one year from today. d) a one-time cash payment of $250,000 immediately. e) a one-time cash payment of $400,000 to be paid in 5 years. f) a one-time cash payment of $650,000 to be paid in 10 years.

SWFT Comprehensive Vol 2020

43rd Edition

ISBN:9780357391723

Author:Maloney

Publisher:Maloney

Chapter5: Gross Income: Exclusions

Section: Chapter Questions

Problem 43P

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