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Problem 1 Assume you are 2 5 years old. The IAW insurance company is offering you the following retirement contract ( called an annuity )
Problem Assume you are years old. The IAW insurance company is offering you the following
retirement contract called an annuity: Contribute $ per year for the next years. When
you reach years of age, you will receive $ per year for as long as you live. Assume that
you believe that the chance that you will die is per year after you will have reached years of
age. In other words, you will receive the first payment with probability the second payment
with probability and so on Also, assume you will finally die for sure at years old. If the
prevailing interest rate is per year, all payments occur at yearend, and it is now January
calculate the expected value of this annuity. Is this annuity a good deal? Use a spreadsheet.
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