a. What is the amount of the annuity purchase required if you wish to receive a fixed

Question:

a. What is the amount of the annuity purchase required if you wish to receive a fixed payment of $200,000 for 20 years? Assume that the annuity will earn 10 percent per year.

b. Calculate the annual cash flows from a $1 million, 20-year fixed-payment annuity earning a guaranteed 10 percent per year if payments are to begin at the end of the current year.

c. Calculate the annual cash flows from a $1 million, 20-year fixed-payment annuity earning a guaranteed 10 percent per year if payments are to begin at the end of year 5.

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,...

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