Consider that you are 50 years old and considering early retirement. An insurance company offers to sell you the following Annuity in exchange for a portion of your IRA.

The Annuity commits to paying you 2,000 per month for the next 25 years, with the first payment to be made beginning one month from today. Your price of the Annuity is $275,000 paid by you today from your IRA. The insurance company is rated AAA, but the investment is not FDIC insured like bank deposits.

 

What is the expected annual rate of return on this investment? From an investment point of view, do you consider this a good investment today? Explain why or why not.

Answer rating: 100% (QA)

To calculate the expected annual rate of return on this investment we need to use the present value ... View the full answer