Allstate Corporation, a publicly traded insurance company, currently offers an annuity product for prospective retirees. A...

Allstate Corporation, a publicly traded insurance company, currently offers an annuity product for prospective retirees. A customer will receive an end-of-year annual payment of 25,000$ for each of 5 years, beginning at the end of Year 30. If the customer requires a return of 11%, what is the fair price of this product? Show the time line.

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Expert Solution

The fair price of this product is calculated as follows

PV = $ 25,000 [ 1 - ( 1+0.11)^-5 / 0.11 ] ( 1+0.11)^-30

PV = $ 4,036.18

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jeff jeffy answered 1 year ago

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