You have been awarded monthly payments of 2800 for 15 years as an insurance settlement ABC Finance has offered to pay you a lump sum amount today in exchange for your annuity stream When determining the price to be paid today will you or will ABC prefer a lower discount rate over a higher discount rate Explain your reasoning

You have been awarded monthly payments of 2800 for 15 years as an insurance settlement ABC Finance has offered to pay you a lump sum amount today in exchange for your annuity stream When determining the price to be paid today will you or will ABC prefer a lower discount rate over a higher discount rate Explain your reasoning

College Accounting, Chapters 1-27

23rd Edition

ISBN:9781337794756

Author:HEINTZ, James A.

Publisher:HEINTZ, James A.

Chapter17: Accounting For Notes And Interest

Section: Chapter Questions

Problem 1MYW

See similar textbooks

Similar questions

You have received a settlement from an insurance company which will pay you $100,000 per year for 12 years at the end of each year and J.G. Wentworth wants to buy your annuity. What is JG Wentworth’s annual rate of return (interest rate) if they are willing to pay you $500,000 today? 7.56% 18.21% 16.94% Interest rate cannot be calculated.
Your financial planner offers you two different investment plans. Plan 1 is a R3958 annual perpetuity. Plan 2 is a 12 year, R8016 annual annuity. Both plans will make their first payment one year from today. At what discount rate would you be indifferent (ie same rate) between these two plans?
For life insurance policies, some of the premium pays for the cost of the insurance, and the remainder goes toward the cash value of the policy and earns interest like a savings account. Consider the following insurance company options. Company 1: pays 4.1% compounded monthly on the cash value of their policies Company 2: pays 4.11% compounded semiannually on the cash value of their policies What is the APY offered by each company? (Round your answers to the nearest hundredth.) Which company offers a higher yield?
For life insurance policies, some of the premium pays for the cost of the insurance, and the remainder goes toward the cash value of the policy and earns interest like a savings account. Consider the following insurance company options. Company 1: pays 4.2% compounded monthly on the cash value of their policies Company 2: pays 4.21% compounded semiannually on the cash value of their policies What is the APY offered by each company? (Round your answers to the nearest hundredth.) Company 1 % Company 2 %
A life insurance co. is trying to sell you an investment policy that will pay you and your heirs $15,199 per year forever. If the policy costs $428,853 today, at what interest rate (in percent) is it properly priced? Answer to two decimals.
You are considering two insurance settlement offers. The first offer includes annual payments of $45,000 a year for 12 years with the first payment made at the beginning of the year. The other offer is the payment of one lump sum amount at the beginning of the year. You are trying to decide which offer to accept given the fact that your discount rate is 7%. What is the mininum amount that you will accept if you are to select the lump sum offer? • A. $540,000.00 • в. $357,420.88 • C. $412,738.96 • D. $382,440.35 • E. $437,358.40
ook ences Chris Seals has just given an insurance company $62,525. In return, she will receive an annuity of $7,458 for 12 years. a. At what rate of return must the insurance company invest this $62,525 to make the annual payments? (Use a Financial calculator to arrive at the answers. Round the final answer to 3 decimal places.) Rate of return b. What rate of return is required if the annuity is payable at the beginning of each year? (Use a Financial calculator to arrive at the answers. Round the final answer to 2 decimal places.) Rate of return
Your insurance company offered you an annuity that pays you $100 at the end of each year. The life of the annuity is 10 years. Assume that market interest rate you can earn on similar risky investments is 8%. What should be the present value of this annuity? If you are given the first payment immediately starting today, what should be the worth of this annuity? Which payment mode will you accept? What will be basis of your decision under time value of money concept?
What is the future value of a 5-year ordinary annuity with annual payments of $ 702, evaluated at a 13.84 percent interest rate? Enter your answer to the nearest $.01. Do not use $ or, signs in your answer. Enter your answer as a positive number. Your Answer:
Suppose you are in charge of annuities for a life insurance company. A customer comes in and wants to buy an annuity that will pay her a fixed amount each month for the rest of her life. She has $1 million to buy the annuity. Explain how you would determine the monthly payment she would get. How would the monthly payment be affected by a rise in interest rates
For life insurance policies, some of the premium pays for the cost of the insurance and the remainder goes towards the cash value of the policy and earns interest like a savings account. consider the following insurance company options. Company 1: pays 4.5% compounded monthly on the cash value of their policies Company 2: pays 4.52% compounded semi annually on the cash value of their policies what is the APY offered by each company? (round your answer to the nearest hundredth)
Subject :- Accounting Helen is contemplating purchasing a single premium annuity from an insurance company. The insurance company is promising to pay $594000 after 8 years. They are estimating a 10% annual return. What amount should Helen pay the insurance company today? $742500 $275137 $277107 $594000