Question
a. Tiffany is 22 years old. She expects to retire at the age of 62. The average life expectancy of an American woman is 87
a. Tiffany is 22 years old. She expects to retire at the age of 62. The average life expectancy of an American woman is 87 years old; and Tiffany believes that it is also her life expectancy. Tiffany would like a pension income of $3000 at the end of each month after retirement. Suppose that the annual interest rate is 6%. How much should Tiffany save at the end of each month until retirement?
b. Forever life insurance is selling a perpetuity contract that pays $1,000 monthly. The contract currently sells for $20,000. What is the effective annual return on this investment.
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