Professor's Annuity Corporation offers a lifetime annuity to retiring professors. For a payment of $87,000 at age 65, the firm will pay the retiring professor $775 a month until his death. a. If the professor's remaining life expectancy is 15 years, what is the monthly interest rate on this annuity? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. b. What is the effective annual interest rate? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. c. If the monthly interest rate is 0.75%, what monthly annuity payment can the firm offer to the retiring professor? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. a. Monthly rate on annuity b. Effective annual rate c. Monthly annuity payment % %

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
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Professor's Annuity Corporation offers a lifetime annuity to retiring professors. For a payment of $87,000 at age 65, the firm will pay
the retiring professor $775 a month until his death.
a. If the professor's remaining life expectancy is 15 years, what is the monthly interest rate on this annuity?
Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.
b. What is the effective annual interest rate?
Note: Do not round intermediate calculations. Round your answer to 2 decimal places.
c. If the monthly interest rate is 0.75%, what monthly annuity payment can the firm offer to the retiring professor?
Note: Do not round intermediate calculations. Round your answer to 2 decimal places.
a. Monthly rate on annuity
b. Effective annual rate
c. Monthly annuity payment
%
%
Transcribed Image Text:Professor's Annuity Corporation offers a lifetime annuity to retiring professors. For a payment of $87,000 at age 65, the firm will pay the retiring professor $775 a month until his death. a. If the professor's remaining life expectancy is 15 years, what is the monthly interest rate on this annuity? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. b. What is the effective annual interest rate? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. c. If the monthly interest rate is 0.75%, what monthly annuity payment can the firm offer to the retiring professor? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. a. Monthly rate on annuity b. Effective annual rate c. Monthly annuity payment % %
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