Question

In: Finance

Mary wishes to annuitize the cash value of her insurance policy at retirement. the cash value...

Mary wishes to annuitize the cash value of her insurance policy at retirement. the cash value is $800,000. what payment (to the nearest dollar) can she expect if she wishes to receive 20 years of payments (starting next year) and interest rates are 3.00%?

Expert Solution

Using financial calculator to calculate annuity starting next year

If payment is made at the end of next year

Inputs : pv = -800,000

Fv = 0

I/y = 3

N = 20

Pmt = compute

We get, Annuity every year is $53,772.57

If payment is made at the beginning of next year

Press 2nd and then pmt

Then again press 2nd and enter , to change to beginning mode

Inputs : pv = -800,000

Fv = 0

I/y = 3%

N = 20

Pmt = compute

We get , Annuity every year is $52,206.37

jeff jeffy answered 2 years ago

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