In this question, consider that you are 60 years old and considering retirement. An insurance company offers to sell you the following Annuity in exchange for a portion of your IRA:- The Annuity commits to paying you 2,000 per month for the next 20 years, with the first payment to be made beginning one month from today.- Your price of the Annuity is $250,000 paid by you today from your IRA.The insurance company is rated AAA, but the investment is not FDIC insured like bank deposits.**What is the expected annual rate of return on this investment?**From an investment point of view, do you consider this a good investment today? Discuss why, or why not.

Computation of expected annual return

Answered: In this question, consider that you are…

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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3. Rico wants to buy a retirement annuity that will pay him the first of 50 semiannual payments of $10,000 ten years from now. How much must he pay to purchase the annuity today if the annuity issuer provides a return on Investment of 4.8% compounded semiannually? I will solve this problem as: an ordinary deferred annuity a deferred annulty due Timeline: Solution:
At the age of 35, to save for retirement, you decide to deposit $90 at the end of each month in an IRA that pays 5% compounded monthly. a. b. Use the following formula to determine how much you will have in the IRA when you retire at age 65. A= A= P[(1+r)²-1] r P -|C Find the interest. or a. You will have approximately $ when you retire. (Do not round until the final answer. Then round to the nearest dollar as needed.) in the IRA b. The interest is approximately $ (Use the answer from part a to find this answer. Round to the nearest dollar as needed.)
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You deposit $11,600 annually into a life insurance fund for the next 10 years, at which time you plan to retire. Instead of a lump sum, you wish to receive annuities for the next 20 years. What is the annual payment you expect to receive beginning in year 11 if you assume an interest rate of 8 percent for the whole time period? (Do not round Intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16)) Annuities per year over the next twenty years
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Assume that you contribute $280 per month to a retirement plan for 25 years. Then you are able to increase the contribution to $480 per month for the next 25 years. Given a 7.2 percent interest rate, what is the value of your retirement plan after the 50 years? Note: Do not round intermediate calculations and round your final answer to 2 decimal places.
You wish to retire in 11 years, at which time you want to have accumulated enough money to receive an annual annulty of $26,000 for 16 years after retirement. During the period before retirement you can earn 12 percent annually, while after retirement you can earn 14 percent on your money. What annual contributions to the retirement fund will allow you to receive the $26,000 annuity? Use Appendix C and Appendix D for an approximate answer, but calculate your final answer using the formula and financial calculator methods. Note: Do not round Intermediate calculations. Round your final answer to 2 decimal places. Annual contribution
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