The financial advisor is weekly column in the local newspaper. Assume you must answer the following question: “I recently retired at age 65, and I have a tax-free retirement annuity coming due soon. I have three options. I can receive A)$30,976 now, B)$359.60 per month for the rest of my life, or C)$513.80 per month for the next 10 years. What should I do?” Ignore the timing of the monthly cash flows and assume that the payments are received at the end of year. Asuume the 10-year annuity will continue to be paid to loved heirs if the person dies before the 10- year period is over.

a) If i= 6%, develop a choice table for lives from 5 to 30 years (you do not know how long this person or other readers may live)

b) How does increasing the interest rate change your recommendations?

Answer rating: 100% (QA)

a Table1 Life 5 Years Option Amount Per Annum PV Factor PV Recommendation Option 1 3097... View the full answer