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What would be the general affect if annuities are received

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Reference no: EM132545606

Nicki Johnson, a sophomore mechanical engineering student, received a call from an insurance agent who believes that Nicki is an older woman that is ready to retire from teaching. He talks to her about several annuities that she could buy that would guarantee her a fixed annual income.

The annuities are as follows:

Annuity            Purchase Price of the Annuity           Amount of Money Received Per Year            Duration of the Annuity (Years)

A                          $50,000                                            $8,500                                                    12

B                           $60,000                                               $7,000                                                 25

C                                $70,000                                           $8,000                                                 20

Question 1: Nicki could earn 11% on her money by placing it in a savings account. Alternatively, she could place it in any of the above annuities. Which annuities in the table above, if any, will earn Nicki a higher return than investing in the savings account earning 11%?

Question 2: What would be the general affect if the annuities are received as an annuity due type of payment?

Reference no: EM132545606

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