1. A person aged 65 exact has finished paid employment and is looking to retire and...
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1. A person aged 65 exact has finished paid employment and is looking to retire and use their savings to provide an income until they die. They have savings of £100,000 to be used to do this. You are asked to calculate a range of benefits that can be bought using the whole of the lump sum, assuming an interest rate of 4% p.a. and mortality AM92(ult). (a) Calculate the amount of income I that the person can receive if they use the lump sum to buy an annuity for life payable annually in advance. [2 marks] (b) The person wants to have extra income of £500 to pay for a nice holiday (where the suns shines a bit more than it does in Manchester), once every two years. They decide that they would like the additional £500 to pay for these holidays and that the first additional £500 should be paid at age 66 exact. Therefore they want an annual income stream of amount I*, I* + 500, I*, I* + 500, .. Calculate the amount I* if the lump sum is used to buy this benefit. [6 marks] 1. A person aged 65 exact has finished paid employment and is looking to retire and use their savings to provide an income until they die. They have savings of £100,000 to be used to do this. You are asked to calculate a range of benefits that can be bought using the whole of the lump sum, assuming an interest rate of 4% p.a. and mortality AM92(ult). (a) Calculate the amount of income I that the person can receive if they use the lump sum to buy an annuity for life payable annually in advance. [2 marks] (b) The person wants to have extra income of £500 to pay for a nice holiday (where the suns shines a bit more than it does in Manchester), once every two years. They decide that they would like the additional £500 to pay for these holidays and that the first additional £500 should be paid at age 66 exact. Therefore they want an annual income stream of amount I*, I* + 500, I*, I* + 500, .. Calculate the amount I* if the lump sum is used to buy this benefit. [6 marks]
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Related Book For
Managing Human Resources
ISBN: 978-0132729826
7th Edition
Authors: Luis Gomez-Mejia, David Balkin, Robert Cardy
Posted Date:
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