5-23. (Solving for Present Value with Annuities) Angus McDonald, a third-year accounting student studying in Scotland,...

Transcribed Image Text:

5-23. (Solving for Present Value with Annuities) Angus McDonald, a third-year accounting student studying in Scotland, receives a call from an insurance agent, who believes Angus is an older man ready to retire from teaching. He talks to him about several annuities that he could buy that would guarantee him an annual fixed income. The annuities are as follows: ANNUITY A B C INITIAL PAYMENT INTO ANNUITY (AT t = 0) $40,000 $70,000 $80,000 AMOUNT OF MONEY RECEIVED PER YEAR $7,500 $8,500 $9,500 DURATION OF ANNUITY (YEARS) 12 25 20 If Angus could earn 12 percent on his money by placing it in a savings account, should he place it instead in any of the annuities? Which ones, if any? Why? 5-23. (Solving for Present Value with Annuities) Angus McDonald, a third-year accounting student studying in Scotland, receives a call from an insurance agent, who believes Angus is an older man ready to retire from teaching. He talks to him about several annuities that he could buy that would guarantee him an annual fixed income. The annuities are as follows: ANNUITY A B C INITIAL PAYMENT INTO ANNUITY (AT t = 0) $40,000 $70,000 $80,000 AMOUNT OF MONEY RECEIVED PER YEAR $7,500 $8,500 $9,500 DURATION OF ANNUITY (YEARS) 12 25 20 If Angus could earn 12 percent on his money by placing it in a savings account, should he place it instead in any of the annuities? Which ones, if any? Why?