Question: 6. [Maximum 6 marks] Ibrahim has saved $550 000. He wants to put the money in an annuity fund where he can withdraw $5000 per

6. [Maximum 6 marks] Ibrahim has saved $550 000. He wants to put the money in an annuity fund where he can withdraw $5000 per month for the next 15 years. a) Find the interest rate, compounded monthly, Ibrahim requires [3] The best interest rate Ibrahim can find is 4.9% p.a. compounded monthly. b) Find the time in years his money will last if he still wants to withdraw $5000 per month. [3] c) Find the maximum amount he can withdraw if he still wants the money to last 15 years. [3]

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=+Does this solve the moral hazard problem? Why or why not?

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=+should be wiped out, but the fi rms creditors should be protected.