# Raina Herzig wishes to choose the best of four immediate-retirement annuities available to her. In each case,

## Question:

Raina Herzig wishes to choose the best of four immediate-retirement annuities available to her. In each case, in exchange for paying a single premium today, she will receive equal, annual, end-of-year cash benefits for a specified number of years. She considers the annuities to be equally risky and is not concerned about their differing lives. Her decision will be based solely on the rate of return she will earn on each annuity. The key terms of the four annuities are shown in the following table.

a. Calculate to the nearest 1% the rate of return on each of the four annuities Raina is considering.

b. Given Raina’s stated decision criterion, which annuity would you recommend?

## Step by Step Answer:

**Related Book For**

## Principles Of Managerial Finance

**ISBN:** 978-0136119463

13th Edition

**Authors:** Lawrence J. Gitman, Chad J. Zutter