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

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?

Step by Step Solution

★★★★★

3.36 Rating (146 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

The amount of the lump sum cash paid by the investor ... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Physics Questions!

For Russia, the United Nations reported a life expectancy of 70. Suppose we add this observation to the data set for Western Europe in the previous exercise. Would you expect the standard deviation...

The mortgage on your house in Winnipeg is 5 years old. It required monthly payments of $1402, had an original term of 30 years, and had an interest rate of 9% (APR with semi-annual compounding). In...

Sean has taken over his fathers home loans business, Auzzie Loans Pty Ltd. There are three directors (Sean and his parents), who are also members of the company. When the global financial crisis hit,...

Growth Companys current share price is $20 and it is expected to pay a $1 dividend per share next year. After that, the firms dividends are expected to grow at a rate of 4% per year. a. What is an...

Growth Companys current share price is $$20$ and it is expected to pay a $$1$ dividend per share next year. After that, the firms dividends are expected to grow at a rate of 4% per year. a. What...

You have applied for a job with a local bank. As part of its evaluation process, you must take an examination on time value of money analysis covering the following questions: a. Draw time lines for...

The Carroltons are deliberating whether to purchase a house or continue to rent for the next 10 years. They are assured by both of their employers that no transfers to new locations will occur for at...

Zylar Industries is a manufacturer of standard and custom-designed bottling equipment. Early in December 20x0, Lyan Company asked Zylar to quote a price for a custom-designed bottling machine to be...

The following trial balance extracts relate to Moston as at 30 June 2020: The following notes are relevant: 1. Revenue includes a 3 million sale (made on 1 January 2020) of maturing goods. The...

Sharon Evans, who graduated from the local university 3 years ago with a degree in marketing, is manager of Ann Naylors store in the Southwest Mall. Sharons store has 5 years remaining on its lease....

A bank pays interest monthly with an EAR of 6.17%. What is the periodic interest rate applicable per month? a. 0.50%. b. 0.42%. c. 0.48%. d. 0.55%. e. 0.52%.

Imagine that you are an innovation consultant. You are facing the task of helping enhance the STARBUCK Coffe Company innovation activities through open and collaborative innovation.b.Suggest some...

Case- Code Red- Healthcare.gov SETTING THE STAGE .... What is healthcare.gov and what was the issue? THE DASHBOARD .... What did it look like? Why is it important? How healthy was it? The ROLLOUT...

You are the manager of a busy insurance office. Last year's abnormal winter gales led to an exceptionally high level of insurance claims for house damage caused by strong winds, and you had...

Source - https://timesofindia.indiatimes.com/nri/us-canada-news/top-south-african-indian-origin-businessmanarrested-for-gupta-linked-fraud-and-corruption/articleshow/83217574.cms) Question 3 (25...

- Explain customer service (key term of customer service) at a Five-Star Hotel in general. - The situation's current link (why) and Find the problems (how the five-star react in detail and what is...

Part 2: Given the following simulacrum, (a) state the appropriate Hypothesis for each H# and state whether the hypothesis is (b) null or alternative, (c) directional or non-directional and (d)...

The overall reaction and equilibrium constant value for a hydrogenoxygen fuel cell at 298 K is 2H 2 (g) + O 2 (g) 2H 2 O(l) K = 1.28 10 83 a. Calculate E cell and G 8 at 298 K for the fuel cell...

Other things being equal, increasing n causes the margin of error of a confidence interval to (a) Increase, (b) Decrease, (c) Stay the same.

According to the Bureau of Labor Statistics, the official unemployment rate was 10.4% among blacks and 4.7% among whites as of February 2015. (www.bls.gov/). a. Identify the response variable and the...

A significance test about a proportion is conducted using a significance level of 0.05. The test statistic equals 2.58. The P-value is 0.01. a. If H 0 were true, for what probability of a Type I...

The following data were obtained by observing a three- step job of a financial managers assistant. a. Using the data and an allowance of 10 percent of job time, determine a standard time for the...

The manager of a large office intends to conduct a work sampling of the time the staff spends on the telephone. The observations will be taken over a period of 50 workdays. The office is open five...

Design a schedule of work sampling observations in which eight observations are made during one eight- hour day (use 0: 00 to 7: 59). Using Table, read the last digit going down column 4 for hours...