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Question 3 Stanley has just been advised of a bequest of a lump sum of 121,500 from his Aunt's will, but it is not
Question 3 Stanley has just been advised of a bequest of a lump sum of 121,500 from his Aunt's will, but it is not due to be available for him for sixteen years (at t = 16 he will receive 121500). Stanley wants to receive some cash earlier than this. He is investigating the purchase of a deferred annuity with the first annual cash flow of the annuity is to be paid at the beginning of year 3 (fourteen cash flows). Assume that the annuity and the lump sum are of equivalent risk and that j12 = 6.24% pa is the appropriate interest rate (opportunity cost of funds for Stanley). How much is the annual cash flow associated with the annuity? (Accurate to the nearest dollar)
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