Question

A lottery offers two options for the prize

6. 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 7%/a, compounded weekly.

a. Which option would the winner choose if s/he expects to live for another 25 years?

b. At what point in time is Option A better than Option B?

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