A representative of a reputable financial services company has approached you as a manager of a four-person group of anesthesiologists with an opportunity to purchase a 10-year annuity due for each member of the group. The annuity due would pay $40,000 each year beginning 5 years from now (i.e. at time = 5). What is the most you would be willing to pay now, per each physician, for this investment? Assume an appropriate discount rate of 7%.© BrainMass Inc. brainmass.com October 17, 2018, 11:10 am ad1c9bdddf
This would be an annuity due (the difference between annuity due and normal annuity is that in annuity due payments are at start of year whereas in normal annuity payments are at end of year).
The formula for the present value of an annuity due, sometimes also called an immediate annuity, is used to calculate a series of periodic payments that start immediately i.e. its paid at the beginning of periods.
(1+i) *P* [(1 - (1+ i) ^ (- n))/i]
P = periodic payment
i = interest rate per period
n = number of periods
This formula would give the value of the payments at the time of the first payment.
In this problem ...
A step by step explanation of the calculation of an annuity due
Finacial Planning - Older Adults
There is a lot of media attention presently in regards to the concerns of social security and medicare and the aging population. One thing I dont see is advice or helpful sites that can help prepare them and even younger people towards retirement.
From what I see many older adults fail to foresee that an illness or disability could leve them in financial ruin unless they take financial and legal preparations to plan for long-term care. Like my parents who did not plan and they have a modest savings and a house paid for, my mother has COPD and lots of health issues, my dad is in exceptional health and works out everyday, so if she should get really sick my dad may lose everything.
1. What are things we should be planning for not only our parents but for ourselves?
2. What safeguards can be placed so that all that I will earn in my life does not get 'taken' by the government just because my husband or I should get ill?View Full Posting Details