1. An immediate lifetime annuity is a type of insurance contract that pays a regular amount each month, so long as you live. Atticus Murphy is 65 years old and expects to live until age 85. The Great Big Insurance Company offers to sell Atticus an immediate lifetime annuity for $200,000, which will pay him $1,550 per month for the rest of his life (so he cannot outlive the income). Is this annuity a good deal, assuming he could put his money into a CD that earns interest at a rate of 6% APR? a. Find the expected PV of this annuity, assuming Atticus lives to age 80. Develop a table (similar to the one in part A problem 1) to find the PV. b. Use the PV function to verify your work. C. Find the expected PV of this annuity, assuming Atticus lives to age 90. Develop a table (similar to the one in part A problem 1) to find the PV. d. Use the PV function to verify your work. 2. Your wealthy Uncle Todd has left you an inheritance, which will pay you $50,000 per year for the next 25 years. Assume the interest rate is 3% APR, and you need to wait until the end of the year for each payment. What is the PV of your inheritance? a. Develop a table (similar to above) to find the PV of this annuity. b. Verify your work with the PV function. 1. An immediate lifetime annuity is a type of insurance contract that pays a regular amount each month, so long as you live. Atticus Murphy is 65 years old and expects to live until age 85. The Great Big Insurance Company offers to sell Atticus an immediate lifetime annuity for $200,000, which will pay him $1,550 per month for the rest of his life (so he cannot outlive the income). Is this annuity a good deal, assuming he could put his money into a CD that earns interest at a rate of 6% APR? a. Find the expected PV of this annuity, assuming Atticus lives to age 80. Develop a table (similar to the one in part A problem 1) to find the PV. b. Use the PV function to verify your work. C. Find the expected PV of this annuity, assuming Atticus lives to age 90. Develop a table (similar to the one in part A problem 1) to find the PV. d. Use the PV function to verify your work. 2. Your wealthy Uncle Todd has left you an inheritance, which will pay you $50,000 per year for the next 25 years. Assume the interest rate is 3% APR, and you need to wait until the end of the year for each payment. What is the PV of your inheritance? a. Develop a table (similar to above) to find the PV of this annuity. b. Verify your work with the PV function
