Professor's Annuity Corp. offers a lifetime annuity to retiring professors. For a payment of $80,000 at age

Question:

Professor's Annuity Corp. offers a lifetime annuity to retiring professors. For a payment of $80,000 at age 65, the firm will pay the retiring professor $600 a month until death.

a. If the professor's remaining life expectancy is 20 years, what is the monthly interest rate on this annuity?

b. What is the effective annual interest rate?

c. If the monthly interest rate is .5%, what monthly annuity payment can the firm offer to the retiring professor?

Annuity
An annuity is a series of equal payment made at equal intervals during a period of time. In other words annuity is a contract between insurer and insurance company in which insurer make a lump-sum payment or a series of payment and, in return,...