A woman has an inheritance in a trust fund for relatives left by her recently deceased father that will pay out $50,000 at the end of each year indefinitely into the future. She just turned 60 and she doesn't think this immediate-perpetuity will meet her retirement needs. She wants to exchange the value of her inheritance in the trust fund for one that will pay her a 5-year deferred annuity immediately, giving her a retirement annuity with annual payments at the end of each year for 20 years after the 5-year extension. period. She would have no remaining interest in the trust fund after 20 payments are made. If the trustee accepts her proposal, how much annual retirement income would she receive? The trust fund earns an annual interest rate equal to 5%.

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Answer i Annual ... View the full answer