jill moran - Funding Jill Morans Retirement Annuity A. Draw...

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Funding Jill Moran’s Retirement Annuity
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• A. Draw a time line depicting all of the cash flows associated with Sunrise’s view of the retirement annuity
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• How large a sum must Sunrise accumulate by the end of year 12 to provide the 20-year, $42,000 annuity? • This is equivalent to figuring out the value of the $20-year $42,000 annuity at the end of year 12, at 12% interest rate
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+ = T r r C PV ) 1 ( 1 1 + = 20 ) 12 . 0 1 ( 1 1 12 . 0 42000 63 . 313716 =
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• NOTE: $313,716.63 is the value of Jill’s total required amount at the end of year 12!!!
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• How large must Sunrise’s equal, annual, end-of-year deposits into the account be over the 12-year accumulation period to fund fully Ms. Moran’s retirement annuity? • This is to figure out what stream of 12-year annuity matches the value of the 20-year annuity at the end of year 12.
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C each year into Jill’s retirement account. • This is an annuity with
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jill moran - Funding Jill Morans Retirement Annuity A. Draw...

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