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2. John is 63 years old and recently retire d. He wishes to provide retirement incom e for himself and is considering an annuit y
2. John is 63 years old and recently retire d. He wishes to provide retirement incom e for himself and is considering an annuit y contract with the Philo Life Insurance C ompany. Such a contract pays him an eq ual-dollar amount each years that he live s. For this cash-flow stream, he must put up a specific amount of money at the be ginning. According to actuary tables, his | ife expectancy is 15 years, and that is the duration on which the insurance company bases its calculations regardless of how | ong he actually lives. If Philo Life Insuran ce Company uses a compound interest ra te of 10 percent in its calculations, how m uch must John pay at the outset for an a nnuity to provide him with $20,000 per ye ar? ((PVIFA10%,15)=7.606 rounded dow n to integral number)
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