You wish to convert your $2 million to a lifetime annuity which will provide you with a monthly...
Question:
You wish to convert your {eq}\$2 {/eq} million to a lifetime annuity which will provide you with a monthly payment for the rest of your life. You wish this payment to being one month after you fund your annuity. Annuity products are paying interest at {eq}3\% {/eq} per year. With your age and gender life remaining is {eq}18 {/eq} years and {eq}4 {/eq} months. Assuming that inflation will be {eq}3\% {/eq} / year over your working life, what is the value of your monthly payment in today's dollars?
Inflation:
Inflation decreases the value of money as consumers are not able to buy the same amount of goods with the same amount of money as before. Interest rates are being offered by different investments, which could help in coming over the explanation.
Answer and Explanation: 1
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View this answerSince the annual interest rate offered by the annuity is same as the prevailing interest rate the value of monthly payment in today's dollars will be...
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What is Annuity? - Definition & Formula
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Chapter 2 / Lesson 7
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Learn about annuities. Understand what an annuity is, examine the annuity formula and learn how to calculate its future value, and see examples of annuities.
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