Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Funding Jill Morans Retirement Annuity: Sunrise Industries wishes to accumulate funds to provide a retirement annuity for its vice president of research, Jill Moran. Ms.

Funding Jill Morans Retirement Annuity: Sunrise Industries wishes to accumulate funds to provide a retirement annuity for its vice president of research, Jill Moran. Ms. Moran by contract, will retire at the end of exactly 12 years. Upon retirement, she is entitled to receive an annual end-of-year payment of $42,000 for exactly 20 years. If she dies prior to the end of the 20-year period, the annual payments will pass to her heirs. During the 12-year accumulation period, Sunrise wishes to fund the annuity by making equal, annual, end-of-year deposits into an account earning 9.0% interest. Once the 20-year distribution period begins, Sunrise pans to move the accumulated monies into an account earning a guaranteed 12.0% per year. At the end of the distribution period, the account balance will equal zero. Note that the first deposit will be made at the end of year 1 and that the first distribution payment will be received at the end of year 13.

Respond to the following:

1) How large a sum must Sunrise accumulate by the end of year 12 to provide the 20-year, $42,000 annuity? 2)How large must Sunrises equal, annual, end-of-year deposits into the account be over the 12-year accumulation period to fully fund Ms. Morans retirement annuity?

Please provide the correct answer thnak you.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Return Distributions In Finance

Authors: Stephen Satchell, John Knight

1st Edition

0750647515, 978-0750647519

More Books

Students also viewed these Finance questions

Question

8. Explain the contact hypothesis.

Answered: 1 week ago

Question

7. Identify four antecedents that influence intercultural contact.

Answered: 1 week ago