Question
Jean-Luc worked for Lapointe Financial Services for five years. He left his vested pension benefits in the Lapointe plan when he changed employers. When he
Jean-Luc worked for Lapointe Financial Services for five years. He left his vested pension benefits in the Lapointe plan when he changed employers. When he retired from his present employer at age 65, Lapointe gave him a choice between taking the vested pension benefits in the form of a lifetime annuity of $15,000 per year paid at the end of the years or a lump sum. Jean-Luc wants to compare the value of the annuity to the lump sum. a) Assuming Jean-Luc lives for 15 years, the rate interest is 7%, and the payment is taken at the end of the year, what is the minimum amount that his employer could offer for him to choose the lump sum instead of the annuity? b) Assuming Jean-Luc lives for 15 years, the rate of interest is 7%, and the payment is taken at the beginning of the year what is the minimum amount that his employer could offer for him to choose the lump sum instead of the annuity?
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