finance

[twag89]

Your grandfather is planning to retire this year. Her firm has offered her a lumpsum retirement payment of $50,000 now or a $6,000 life time ordinary annuity whichever she chooses. Your grandfather is in reasonably good health and expects
to live for at least 10 years more. Which option should she choose, assuming that
an 7 percent annual interest rate is appropriate to evaluate the annuity?

 

[tkhunny]

Except in some jurisdictions (notably Montana), mortality tables are sex-differentiated. Thus, you should decide if this is your grandfather or if she is your grandmother.

You have not specified the frequency of payments of this annuity?

Annual at 7%? Meh. Exactly 10 years isn't much different. A little more, maybe.
Monthly? Sure!! Where do I sign?!

This is all without actually considering the life-contingent piece.

One would also be wise to consider any guarantee in the Life Annuity. Without a guarantee of any kind, you die tomorrow, you get nothing - so also any beneficiary you might have named. $0.00 is not usually very satisfying.

In other words, you really have not provided nearly enough information to formulate a rational response.