Asked by Saharnaz Pourhaghgouy on Apr 29, 2024
Verified
Mr. Donatelli moved from Toronto to Winnipeg to take a job promotion. After selling their Toronto home and buying a home in Winnipeg, the Donatellis have $85,000 in cash on hand. If the funds are used to purchase a deferred annuity from a life insurance company providing a rate of return of 8.25% compounded annually, what payments will they receive at the end of every six months for 20 years after a 9-year deferral period?
Deferred Annuity
An insurance contract in which payment of annuities is delayed to a future date.
Compounded Annually
The process where interest is calculated and added to the principal amount once every year, leading to an increase in the interest amount for the following year.
Deferral Period
A set period during which payments of principal or interest on a loan are temporarily delayed.
- Work out the value of annuities and become aware of the determinants affecting their price.
- Analyze and compare different types of annuities and perpetuities, including deferred annuities.
- Utilize the tools of compound interest to ascertain the future and present value of financial investments.
Verified Answer
Learning Objectives
- Work out the value of annuities and become aware of the determinants affecting their price.
- Analyze and compare different types of annuities and perpetuities, including deferred annuities.
- Utilize the tools of compound interest to ascertain the future and present value of financial investments.
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