Calculating the present value of an ordinary annuity) (Related to Checkpoint 6.2) Nicki Johnson, a sophomore mechanical engineering student, received a call from an insurance agent who believes that Nicki is an older woman who is ready to retire from teaching. He talks to her about several annuities that she could buy that would guarantee her a fixed annual income. The annuities are as follows: Annuity Purchase Price of the Annuity Amount of Money Received per Year Duration of the Annuity (years) A $50,000 $8,500 12 B $60,000 $7,000 25 C $70,000 $8,000 20 Nicki could earn 11 percent on her money by placing it in a savings account. Alternatively, she could place it in any of the above annuities. Which annuities in the table above, if any, will earn Nicki a higher return than investing in the savings account earning 11 percent?
Calculating the
Annuity Purchase Price of the Annuity Amount of Money Received per Year Duration of the Annuity (years)
A $50,000 $8,500 12
B $60,000 $7,000 25
C $70,000 $8,000 20
Nicki could earn 11 percent on her money by placing it in a savings account. Alternatively, she could place it in any of the above annuities. Which annuities in the table above, if any, will earn Nicki a higher return than investing in the savings account earning 11 percent?
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