The Financial Advisor is a weekly column in the local newspaper. Assume you must answer the following question. “I recently retired at age 65, and I have a tax-free retirement annuity coming due soon. I have three options. I can receive (A) $30,976 now, (B) $359.60 per month for the rest of my life, or (C) $513.80 per month for the next 10 years. For option C if I die within 10 years, payments continue to my heirs. My interest rate is 9%. What should I do?” Ignore the timing of the monthly cash flows and assume that the payments are received at the end of year. (a) Develop a choice table for life spans from age 66 to 100. (b) If remaining life is 20 years and i = 9%, use an incremental rate of return analysis to recommend which option should be chosen.

The Financial Advisor is a weekly column in the local newspaper. Assume you must answer the following question. “I recently retired at age 65, and I have a tax-free retirement annuity coming due soon. I have three options. I can receive (A) $30,976 now, (B) $359.60 per month for the rest of my life, or (C) $513.80 per month for the next 10 years. For option C if I die within 10 years, payments continue to my heirs. My interest rate is 9%. What should I do?” Ignore the timing of the monthly cash flows and assume that the payments are received at the end of year. (a) Develop a choice table for life spans from age 66 to 100. (b) If remaining life is 20 years and i = 9%, use an incremental rate of return analysis to recommend which option should be chosen.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 19P

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