Asked by
Yazan Callas
on Oct 19, 2024
Verified
An insurance company plans to sell annuities to investors. Based on actuarial calculations, an investor has a 18-year life span, and he wants a $40,000-per-year annuity, payable at the end of each year. If the insurance company uses a 3.78% assumed investment rate, how much should the annuity cost?
A) $496,928
B) $512,236
C) $515,548
D) $553.982
Actuarial Calculations
The mathematical analysis performed by actuaries to calculate risks, premiums, life expectancies, and pension contributions, based on statistical data.
Assumed Investment Rate
The hypothesized annual rate of return expected from an investment used in financial planning and projections.
Annuity Cost
The initial sum paid or the series of periodic payments required to obtain an annuity.
- Utilize the notion of time value of money to develop strategies for investment and savings for retirement.
- Absorb the importance of consistent yearly inputs and their influence on the long-term value of retirement assets.
Verified Answer
CA
Learning Objectives
- Utilize the notion of time value of money to develop strategies for investment and savings for retirement.
- Absorb the importance of consistent yearly inputs and their influence on the long-term value of retirement assets.