Your mother retired today and has the option of purchasing an annuity. If she exchanges $26,000 of her savings today for a 8.80 percent, 17-year annuity, what will her annual cash flow be? (Unless stated otherwise, always assume the first payment is received at the end of the period, not the start). NOTE: You are exchanging cash today for a series of cash flows. This is an annuity problem (chapter 6), where we the value of the annuity is defined at the START of all the cash flows, so use the present value of an annuity equation PVA = C1-(1+r)** You already know what the annuity is worth today (PVA), the number of payments (t), as well as the discount rate (r). You only need to calculate C, the size of the cash flow. Multiple Choice $5,902.53 $2,812.45 $1,529.41 $3,004.21 $3 20125 Suppose you are going to receive $6,000 per year for 8 years. The appropriate interest rate is 8 percent per year. Requirement 1: What is the present value of the payments if they are in the form of an ordinary (a) annuity (cash flow starts at the end of the first compounding period)? 40,396.47 What is the present value if the payments are an annuity due (cash flow starts at the (b)beginning of the first compounding period)? 34,479.83 Requirement 2: (a)Suppose you plan to invest the payments for 8 years, what is the future value if the payments are an ordinary annuity? 63,819.77 (b)Suppose you plan to invest the payments for 8 years, what is the future value if the payments are an annuity due? 57.496.77