Suppose a 65-year-old person wants to purchase an annuity from an insurance company that would pay...

Suppose a 65-year-old person wants to purchase an annuity from an insurance company that would pay $21,600 per year until the end of that person’s life. The insurance company expects this person to live for 15 more years and would be willing to pay 8 percent on the annuity. How much should the insurance company ask this person to pay for the annuity?

		$175,131.62
		$188,964.27
		$154,356.29
		$184,884.74

Expert Solution

jeff jeffy answered 5 months ago

a. Suppose a 65-year-old person wants to purchase an annuity from an insurance company that would...

a. Suppose a 65-year-old person wants to purchase an annuity from an insurance company that would pay $20,600 per year until the end of that person’s life. The insurance company expects this person to live for 15 more years and would be willing to pay 8 percent on the annuity. How much should the insurance company ask this person to pay for the annuity? b. A second 65-year-old person wants the same $20,600 annuity, but this person is healthier and...

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