Question
a. Suppose you are making a retirement plan for the Young family. The family wishes to use their combined pension fund to purchase an annuity
a. Suppose you are making a retirement plan for the Young family. The family wishes to use their combined pension fund to purchase an annuity product that will pay $12,480 per year in perpetuity, and the first annuity income will be received at the end of this year. Suppose the appropriate rate of return on this product is 7.8% per year. What is the value of this annuity product now (at the time of purchase)?
Answer: $....... (round to the nearest dollar)
b. What is the value of the product (at the time of purchase) if the family delays the purchase until the end of the year ( and delay receiving their first income also for a year)?
Answer: $....... (round to the nearest dollar)
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