You just paid $353,000 for an annuity that will pay you and your heirs $11,200 a year forever. What rate of return are you earning on this policy?
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- Rate of returnYou just paid $350,000 for an annuity that will pay you and your heirs $18,400 a year forever. What rate of return are you earning on this policy? Question 2 options: 5.00% 20.00% 2.00% 10.00% 6.50%What’s the rate of return you would earn if you paid $1,500 for a perpetuity that pays $105 per year?
- Assume that you just inherited an annuity that will pay you $10,000 per year for10 years, with the first payment being made today. A friend of your mother offersto give you $60,000 for the annuity. If you sell it, what rate of return would yourmother’s friend earn on his investment? If you think a “fair” return would be 6%, howmuch should you ask for the annuity? (13.70%, $78,016.92)You are willing to pay $31,250 now to purchase a perpetuity that will pay you and your heirs $2,500 each year, forever, starting at the end of this year. If your required rate of return does not change, how much would you be willing to pay if this were a 40-year, annual payment, ordinary annuity instead of perpetuity?You believe you will need to have saved $593,000 by the time you retire in 30 years in order to live comfortably. You also believe that you will inherit $113,000 in 5 years. 1) If the interest rate is 7% per year, what is the future value of your inheritance at retirement? 2) How much additional money must you save to meet your retirement goal, assuming you save your entire inheritance?
- Your uncle is about to retire, and he wants to buy an annuity that will provide him with $97,000 of income a year for 20 years, with the first payment coming immediately. The going rate on such annuities is 5.45%. How much would it cost him to buy the annuity today? a. $1,192,059.14 b. $1,164,011.03 c. $1,195,837.87 d. $1,261,011.03 e. $1,227,449.63Assume that you own an annuity that will pay you $15,000 per year for 12 years, with the first payment being made today. You need money today to start a new business, and your uncle offers to give you $160,000 for the annuity. If you sell it, what rate of return would your uncle earn on his investment? O 2.28% O 2.20% O 2.22% 2.33% 2.59%You would like to provide $145,000 a year forever for your heirs. How much money must you deposit today to fund this goal if you can earn a guaranteed 5.8 percent rate of return?
- Your father is about to retire, and he wants to buy an annuity that will provide him with $52,000 of income a year for 25 years, with the first payment coming immediately. The going rate on such annuities is 5.95%. How much would it cost him to buy the annuity today? a. $707,644.77 b. $873,949.58 c. $679,475.65 d. $719,904.45 e. $667,904.45You believe you will need to have saved $480,000 by the time you retire in 30 years in order to live comfortably. You also believe that you will inherit $115,000 in 5 years. a) If the interest rate is 6% per year, what is the future value of your inheritance at retirement? b) How much additional money must you save to meet your retirement goal, assuming you save your entire inheritance?If you receive an inheritance of $10,000 today, how long do you have to invest it at 8% per year to be able to withdraw $2000 every year forever? Assume the 8% per year is a return that you can depend on forever.
