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    Time Value: Value That Alternative Option

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    You are an investment manager and a client wants to know the lump sum he would need to deposit today to receive a $35,000 supplement retirement annuity for 15 years beginning when he retires in 20 years. Looking at his investment options, you expect an average annual return on the annuity of 8 percent.

    How else could you structure his payment so as not to be such a shock to his pocket book? Value that alternative option.

    Here's the loaded document, "Below" (see attachment).

    The Annuity Payment

    Payment: $1,289.03
    Years: 15
    The Annual Rate of: 8%

    $35,000.00 (The Future Value)

    To make the payments easier for the retiree, I would extend the years to 20 since he is not retiring until five years later.

    The Annual payment will be $764.83

    New Annuity Payment

    Payment: $764.83
    Years: 20
    The same Annual Rate of: 8%.

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    Solution Summary

    The solution determines how else could you structure a payment so as not to be such a shock to their pocket book.