Question
Donations. A page from Foresight from the Art Institute of Chicago is attached. It describes the details of a charitable gift annuity. Consider the figures
Donations. A page from Foresight from the Art Institute of Chicago is attached. It describes the details of a charitable gift annuity. Consider the figures for a one-person annuity. For example, a 55-year old donor would receive an annual payment equal to 6.7% of the donation for the rest of the donor's life. Older donors would receive higher annual payments (they are expected to collect fewer payments). The interest rate is 5%. Ignore taxes. Consider a 55-year old donor who will live for 20 more years (and receive 20 annuity payments). Suppose the donor gives a $1,000,000 charitable gift annuity to the Art Institute. (a) What is the value of the gift to the Art Institute? (b) How long would the donor have to live for the donation to become a gift from the Art Institute to the donor?
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