Suppose Becky has her choice of $10,000 at the end of each month for life or a single prize of… 1 answer below »

Suppose Becky has her choice of $10,000 at the end of each month for life or a single prize of $1.5 million. She is 35 years old and her life expectancy is 40 more years. (i) Find the present value of the annuity if money is worth 7.2%, compounded monthly. (ii) If she takes the $1.5 million, spends $700,000 of it, and invests the remainder at 7.2% compounded monthly, what amount will she receive at the end of each month for the next 40 years?

 

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