Guidelines:

-Please solve it manually without the use of excel and financial calculator

- Write formula used to calculate the rates and explain steps

LG 6 Personal Finance Problem P5-55 Choosing the best annuity Raina Herzig wishes to choose the best of four immediate-retirement annuities available to her. In each case, in exchange for paying a single premium today, she will receive equal, annual, end-of-year cash benefits for a specified number of years. She considers the annuities to be equally risky and is not concerned about their differing lives. Her decision will be based solely on the rate of return she will earn on each annuity. The key terms of the four annuities are shown in the following table. Annuity Life (years) B D Premium paid today $30,000 25,000 40,000 35,000 Annual benefit $3,100 3,900 4,200 4,000 20 10 15 12 a. Calculate to the nearest 1% the rate of return on each of the four annuities Raina is considering b. Given Raina's stated decision criterion, which annuity would you recommend? LG 6 Personal Finance Problem P5-55 Choosing the best annuity Raina Herzig wishes to choose the best of four immediate-retirement annuities available to her. In each case, in exchange for paying a single premium today, she will receive equal, annual, end-of-year cash benefits for a specified number of years. She considers the annuities to be equally risky and is not concerned about their differing lives. Her decision will be based solely on the rate of return she will earn on each annuity. The key terms of the four annuities are shown in the following table. Annuity Life (years) B D Premium paid today $30,000 25,000 40,000 35,000 Annual benefit $3,100 3,900 4,200 4,000 20 10 15 12 a. Calculate to the nearest 1% the rate of return on each of the four annuities Raina is considering b. Given Raina's stated decision criterion, which annuity would you recommend