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Category > Business & Finance Posted 01 Jun 2017 My Price 8.00

Assume you are 25 years old

Assume you are 25 years old. The IAW insurance company is offering you the following retirement contract (called an annuity): Contribute $2,000 per year for the next 40 years. When you reach 65 years of age, you will receive $30,000 per year for as long as you live. Assume that you believe that the chance that you will die is 10% per year after you will have reached 65 years of age. In other words, you will receive the first payment with probability 90%, the second payment with probability 81%, and so on. Assume the prevailing interest rate is 5% per year, all payments occur at yearend, and it is January 1 now. Is this annuity a good deal? (Use a spreadsheet.)

 

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Status NEW Posted 01 Jun 2017 05:06 AM My Price 8.00

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