A life insurance company issues a whole life annuity immediate with annual payments. The annuity is issued to (65). The annuity pays 50,000 at the end of each year for the life of the annuitant with the first payment being made at age 66. You are given: A single premium is paid to purchase this annuity. Mortality follows the Illustrative Life Table with i = 0.06. Assume that the single net premium, P, is 110% of the expected present value at issue of benefits. Calculate the probability that this policy will generate a profit using P.

A life insurance company issues a whole life annuity immediate with annual payments. The annuity is issued to (65). The annuity pays 50,000 at the end of each year for the life of the annuitant with the first payment being made at age 66. You are given: A single premium is paid to purchase this annuity. Mortality follows the Illustrative Life Table with i = 0.06. Assume that the single net premium, P, is 110% of the expected present value at issue of benefits. Calculate the probability that this policy will generate a profit using P.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Two annuity immediates in perpetuity have a present value of $5,000 and a common effective annual interest rate. The first annuity makes payments of X at the end of every 4 years while the second makes payment of $50 at the end of every two months. Find X.
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refers to receiving a set monthly payment for the rest of your life. O Certain Period Annuity O Single Life Annuity O Joint & Survivor Annuity O Lump-sum Annuity
A 6-year term insurance policy has an annual premium of $500, and at the end of 6 years, all payments and interest are refunded. What lump-sum deposit is necessary to equal this amount if you assume an interest rate of 2.5% compounded annually? (a) State the type. future value present value of an annuity sinking fund amortization ordinary annuity (b) Answer the question. (Round your answer to the nearest cent.) $
Age 60 61 62 63 65 66 67 64 68 69 80 81 82 70 71 83 84 85 86 87 88 89 90 72 73 74 75 76 77 78 79 Table I (Single Life Expectancy) (For Use by Beneficiaries) Life Expectancy 27.1 26.2 25.4 24.5 23.7 22.9 22.0 21.2 20.4 19.6 18.8 18.0 17.2 16.4 15.6 14.8 14.1 13.3 12.6 11.9 11.2 10.5 9.9 9.3 8.7 8.1 7.6 7.1 6.6 6.1 5.7 Age 91 92 93 94 95 96 97 98 99 100 101 102 103 104 105 106 107 108 109 110 111 112 113 114 115 116 117 118 119 120+ Life Expectancy 5.3 4.9 4.6 4.3 4.0 3.7 3.4 3.2 3.0 2.8 2.6 2.5 2.3 2.2 2.1 2.1 2.1 2.0 2.0 2.0 2.0 2.0 1.9 1.9 1.8 1.8 1.6 1.4 1.1 1.0
An insurer needs to make the following annuity payments to an individual: £744 paid at the beginning of each year for the first 5 years and then £654 paid at the beginning of each month for the next 5 years and then £798 paid at the beginning of each quarter for the following 8 years. Assuming a nominal rate of interest of 2.7% pa convertible quarterly throughout the entire period, how much total fund the insurer needs to hold today in order to meet these payments? Express your answer in £s to 2 decimal places. (correct answer: 53269.67) (need working out)
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Annuity payments are assumed to come at the end of each payment period (termed an ordinary annuity). However, an exception occurs when the annuity payments come at the beginning of each period (termed an annuity due). What is the future value of a 15-year annuity of $1,600 per period where payments come at the beginning of each period? The interest rate is 9 percent. Use Appendix C for an approximate answer, but calculate your final answer using the formula and financial calculator methods. To find the future value of an annuity due when using the Appendix tables, add 1 to n and subtract 1 from the tabular value. For example, to find the future value of a $100 payment
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At your favorite annuity store. Annuities-R-Us, you see a security that offers 46 equal payments, with the first payment of $600 occurring today, and all other payments of $600 paid in succeeding 7-month intervals: payments will therefore be at months 0, 7, 14, 21 ... 294, 301, 308, and 315. You determine that the correct discount/compounding rate is a nominal annual rate of 5.0 percent, with monthly compounding. Given this information, determine the value of this annuity at Month 315. O $57,184 O $74.982 O $48,877 $67,259 O $39.014
please show the step by step solution. Do not skips steps. Explain your steps Please write on paper
A perpetuity makes its first annual payment of $110 exactly 17 years from today. The discount rate is 6.1% per annum compounded annually. 1) What is the present value of this perpetuity valued at exactly Year 13? (Round your answer to the nearest cent) 2) What is the present value of this perpetuity valued at exactly Year 0? (Round your answer to the nearest cent)

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