Mr. Senior, single, aged 65, has a life expectancy of 15 years. He owns a house worth
Question:
Mr. Senior, single, aged 65, has a life expectancy of 15 years. He owns a house worth 500,000; he is mortgage free. He thinks of two choices: (1) a life estate contract. The cost of life estate estimated by an interested investor is 250,000. He plans to use the lump-sum cash paid (what is the amount?) by the investor to buy a life annuity, for which his favored financial institution quotes that the monthly income is based on j2=5% with the amortization period equal to his life expectancy. (2) a sale leaseback arrangement. He plans to use the sales price to buy a life annuity with the same conditions as in (1). However, in this case, he has to pay a rent of 1,500 per month. His monthly income would be monthly cash paid from annuity minus rent. What is the monthly income in each option?
Statistics The Art and Science of Learning from Data
ISBN: 978-0321997838
4th edition
Authors: Alan Agresti, Christine A. Franklin, Bernhard Klingenberg