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1. Edna invests $30,000 and buys an annuity that pays $2000 every 6 months (1st payment 6 months from now) for 5 years, followed by
1. Edna invests $30,000 and buys an annuity that pays $2000 every 6 months (1st payment 6 months from now) for 5 years, followed by $1500 every 6 months for as long as possible. The annuity earns interest at i(2) = 6% for the first 3 years, followed by il2) = 5% thereafter. (a) How many semi-annual payments will Sally get in total? (4 marks) (b) What would be the size of her final payment if it is made at the same time as his last regular $1500 payment? (2 marks) (c) What would be the size of her final payment if it is made 6 months after his last regular $1500 payment? (2 marks) 1. Edna invests $30,000 and buys an annuity that pays $2000 every 6 months (1st payment 6 months from now) for 5 years, followed by $1500 every 6 months for as long as possible. The annuity earns interest at i(2) = 6% for the first 3 years, followed by il2) = 5% thereafter. (a) How many semi-annual payments will Sally get in total? (4 marks) (b) What would be the size of her final payment if it is made at the same time as his last regular $1500 payment? (2 marks) (c) What would be the size of her final payment if it is made 6 months after his last regular $1500 payment? (2 marks)
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