QUESTION 16

1. You are considering the following annuity for a client. Payments of $15,000 per year for 20 years beginning at the end of next year. (payments occur at the end of each year, first payment one year after you buy the annuity contract).

   The price the insurance company is charging for this annuity $100,000. You client must make the payment today (time 0).

   You are seeking an internal rate of return of at least 15%. This annuity meets your return criteria. Use the Excel IRR function to solve this problem.

   True

   False

5.55555 points

QUESTION 17

1. Your client has asked you for advice concerning the following annuity for a client. Payments of $15,000 per year for 20 years beginning at the end of next year. (payments occur at the end of each year, first payment one year after you buy the annuity contract).

   The price the insurance company is charging your client for this annuity $120,000. You must make the payment today (time 0). The client requires an internal rate of return on the investment of 12%. Your client should buy this annuity.

   Use the Excel IRR function to solve this problem.

   True

   False

5.55555 points

QUESTION 18

1. Your client has asked you for advice concerning the following annuity for a client. Your client will receive payments from the insurance company that is selling the annuity of $40,000 per year for 15 years beginning at the end of year 10. (payments occur at the end of each year, first payment 10 years after you make the initial payment to buy the annuity contract). For ten years your client receives no annuity payments. The first payment to your client is at the end of year 11.

   The price the insurance company is charging your client for this annuity $10,000 per year for 11 years. This means your client must make annual payments at the end of each year beginning at time 0 of $10,000. Your client must make a total of 11 payments of $10,000. The client requires an internal rate of return on the investment of at least 14%. Your client should buy this annuity.

   Use the Excel IRR function to solve this problem.

   These are the contractual cash flows of the annuity.

   time	cash flow
   0	($10,000)
   1	($10,000)
   2	($10,000)
   3	($10,000)
   4	($10,000)
   5	($10,000)
   6	($10,000)
   7	($10,000)
   8	($10,000)
   9	($10,000)
   10	($10,000)
   11	$40,000
   12	$40,000
   13	$40,000
   14	$40,000
   15	$40,000
   16	$40,000
   17	$40,000
   18	$40,000
   19	$40,000
   20	$40,000
   21	$40,000
   22	$40,000
   23	$40,000
   24	$40,000
   25	$40,000

   True

   False