Posted by
**Gibbons** on
.

Suppose an employee of a company is retiring and has the choice of two benefit options under the company pension plan. Option A consists of a guaranteed payment of $1,575 at the end of each month for 10 years. Alternatively, under option B the employee receives a lump-sum payment equal to the present value of the payments described undeq option A.

(a) find the sum of payments under option A.

(a) find the lump-sum payment under option B if it is determined by using an interest rate of 18% compounded monthly.