Question 14 Calculate and Decide on Retirement Investment Choices: (a) Stephen C

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Question 14 Calculate and Decide on Retirement Investment Choices: (a) Stephen Colonnello is retiring from a long career at Du Pont with a Pension Lum Sum of $400,000 He discussed investment options with a financial advisor at Fidelity Investments who also suggests that he goes with Annuity Option The option guarantees that he will receive $26.000 at the end of each year for the rest of his life Please calculate the interest rate used in this calculation. (b) John Greenwald. a neighbor, also is retiring from a long career at CIII Bank with a Pension Lum Sum of S860,000 He discussed investment options with a financial advisor at Edward Jones who suggests that he goes with Annuity Option The option guarantees that he will receive $32.000 at the end of each year for the rest of his life Please calculate the interest rate used in this calculation. YOU MUST SHOW YOUR COMPLETE CALCULATIONS:

Explanation / Answer

a. ulation of rate of interest of annuity%

26000/400000=6.5%

b. 32000/860000=3.72%

As we do not have the lible we cannot find the remaining no of years of life as the probability and the age of investment is also not provided to us.

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