Xia has an inheritance in a trust fund left by her recently deceased mother that will pay 50,000 at the end of each year indefinitely into the future. She just turned 60 years old and she believes that this perpetuity-immediate does not meet her retirement needs. She wishes to exchange the value of her inheritance in the trust fund for a 5-year deferred annuity-immediate that provides annual payments for 20 years. If the trustee agrees to her proposal, how much annual retirement income would she receive? The trust fund is earning an annual effective rate of interest of 5%.

Xia has an inheritance in a trust fund left by her recently deceased mother that will pay 50,000 at the end of each year indefinitely into the future. She just turned 60 years old and she believes that this perpetuity-immediate does not meet her retirement needs. She wishes to exchange the value of her inheritance in the trust fund for a 5-year deferred annuity-immediate that provides annual payments for 20 years. If the trustee agrees to her proposal, how much annual retirement income would she receive? The trust fund is earning an annual effective rate of interest of 5%.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 19P

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