The second product Suzie represents is an annuity. The customers of this product are typically retirees that use their retirement savings to buy a steady income stream. Like before, there is a range of options for this product, but the most typical arrangement is as follows: 

• Customers buy this product on their 65th birthday when they retire. 

• The annuity will make 20 annual payments of $80,000. 

• The first annual payment of $80,000 will occur on the customer’s 68th birthday (customers typically rely on their personal savings to travel for the first few years). 

• For this product, Wagon Financial can invest the customers’ money at 12% per annum effective

Suppose that immediately after making the fifth payment to Joseph as described above, Wagon Financial also implements a new investment strategy that they believe will yield even higher investment returns than the original 12% per annum. 

Assuming this to be true, would Wagon Financial need to set aside more or less money than your answer in part f) to be sure that they can afford to make all future payments to Joseph? Justify your answer.

Answer rating: 100% (QA)

Wagon Financial would need to set aside more money than your answer in part f to be sure that they c... View the full answer