On 1 November 2020, James was eligible to receive the following three annuities.
(a) $2000 per annum payable on 1 February each year, with the Final payment to be made on 1 February 2042;
(b) $3200 per annum payable quarterly on 1 January, 1 April, 1 July and 1 October each year, with the Final payment to be made on 1 January 2037;
(c) $1800 per annum payable monthly on the First day of each month, with the Final payment to be made on 1 August 2039.
Immediately after receiving the monthly payment due on 1 November 2020, James asked that these three annuities be combined into a single annuity payable half-yearly on 1 February and 1 August in each subsequent year with the Final payment to be made on 1 February 2042. Find the amount of the revised annuity, given it was calculated assuming an interest rate of 8% per annum effective. Assume all months are of equal length.

Answer rating: 100% (QA)

VALUE OF THREE ANNUITIES AS ON 1 November 2020 a 2000 per annum payable on 1 February each year with ... View the full answer