Assume that a pension plan offers to pay $500,000 on a person's retirement(his/her sixty-fifth birthday) or a semi-annual annuity for the remainder of theperson's life – i.e., starting 6 months from the date of retirement and includinghis/her date of death. Interest rates are 7 percent compounded annually, and aperson's life expectancy has been determined statistically as being 78.5 years.Calculate the amounț of the annuity that would make a person indifferent betweenthe options?l .Ysm

Annuity: It is a payment made in series at equal intervals.

Answered: Assume that a pension plan offers to…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

See similar textbooks

Similar questions

Assume that a pension plan offers to pay $500,000 on a person's retirement (his/her sixty-fifth birthday) or a semi-annual annuity for the remainder of the person's life - i.e., starting 6 months from the date of retirement and including his/her date of death. Interest rates are 7 percent compounded annually, and a person's life expectancy has been determined statistically as being 78.5 years. Calculate the amnunt of the annuity that would make a person indifferent between the options? A person joins a pension plan at age 40 (40" birthday). How much will s/he have to pay into the pension fund each year in order to accumulate a balance of $500,000 by the time s/he retires (age 65)? Assume that the final payment is on his/her 60th birthday. Interest rates are 9% compounded semi-annually.
What should be the balance in a Registered Retirement Income Fund (RRIF) that will provide $2,500 at the beginning of each half-year for 5 years, if the RRIF earns 4.75% compounded quarterly?
Question 1 (Assume that a pension plan offers to pay $300,000 on a person’s retirement (his/her sixty-fifth birthday) or a semi-annual annuity for the remainder of the person’s life– i.e.,starting 6 months from the date of retirement and including his/her date of death. Interest rates are 8 percentcompounded semi-annually , and a person’s life expectancy has been determined statistically as being 85 years. Calculate the amount of the annuity that would make a person indifferent between the options? Question 2 A person joins a pension plan at age 35. How much will she have to pay into the pension fund each year in order to accumulate a balance of $250,000 by the time s/he retires (age 65)? Assume that the payments start on his/her 35th birthday and the final payment is on his/her 60th birthday. Interest rates are 7% compounded annually. Question3 a) Laura Smith is planning for her and her husband Luke’s retirement. Both Luke and Laura expect to retire in 35 years (when they turn 65).…
The beneficiary of a life insurance policy is to receive $2000 a year for 5 years, the first payment to be made at the time of the death of the injured. Find the value of the annuity at the time of death of injured, assuming the current interest rate to be 4%. Answer: $9259.8
Just prior to the payout period the amount of money that is available in the contract as principal paid in over the life of the annuity is determined at $200,000. The total annuity is currently valued at $360,000. The annuity payment is calculated at $24,000 per year. Our client wants to retire at age 65. The IRS Tables multiplier from the IRS Table for Age 65 is 15 (remaining life expectancy). What amount will be tax-excludible to the annuitant? $1,111 until the principal amount has been exhausted $888.89 for the life of the annuitant $1,111 for the life of the annuitant $888.89 until the principal amount has been exhausted
A person has an individual retirement account that they contribute | . $2,150 to annually at the end of each year. The person wants to retire after making 35 annual contributions to the account. Assuming that the account earns 12% interest annually, using the Future Value of an Annuity of 1 table, compute the value of the account on the date of the final contribution (35 years from the present).
What should be the balance in a Registered Retirement Income Fund (RRIF) that will provide $3,000 at the beginning of each half-year for 4 years, if the RRIF earns 5.25% compounded monthly?
D) A retiree invested P400,000 in a pension plan that earns 15% interest compounded monthly. If pension payments are given every three months, determine the amount of each payment that the retiree will receive for 15 years.
Determine the present value of future contributions to a pension plan for a person aged 35, earning 30.000$ per year and expecting to retire at 65. The pension plan requires contributions of 5% of salary and the employee expects to receive average annual salary increases of 3%. Use an annual effective rate of interest of 7% and assume contributions are made at the end of each year.
Suppose your aunt has worked for 40 years and has accumulated a "nest-egg" of $1,000,000. She wishes to begin receiving an annual payment beginning next year, and continuing for another 20 years. If a pension plan will guarantee her an annual interest rate of at least 5% effective, what is her payment? Please show procedure and formulas used. Thanks
A death benefit on a life insurance policy can be paid in one of the following three ways: (i) A perpetuity of $250 at the end of each month (ii) $795.70 at the end of each month for n years (iii) One payment of $81,007 at the end of n years If each payment method produces the same present value for the death benefit, what is the present value of the death benefit? A. 48,300 B. 55,600 C. 61,900 D. 69,200 E. 78,500
A 40-year-old individual will be paid 100 TL in the first year at the beginning of the term and 50 TL increase in the following years for 5 years. Calculate the net single premium to be paid by the individual who will purchase such an annuity of life.

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS