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23. You have a chance to buy an annuity that pays $550 at the beginning of each year for 3 years. You could earn 5.5% on your money in other investments with equal risk. What is the most you should pay for the annuity?

a. $1,412.84

b. $1,487.20

c. $1,565.48

d. $1,643.75

e. $1,725.94

24. You have a chance to buy an annuity that pays $5,000 at the beginning of each year for 5 years. You could earn 4.5% on your money in other investments with equal risk. What is the most you should pay for the annuity?

a 20,701

b. $21,791

c. $22,938

d. $24,085

e. $25,289

25. Your uncle is about to retire, and he wants to buy an annuity that will provide him with $75,000 of income a year for 20 years, with the first payment coming immediately. The going rate on such annuities is 5.25%. How much would it cost him to buy the annuity today?

a. $825,835

b. $869,300

c. $915,052

d. $963,213

e. $1,011,374

26. Your father is about to retire, and he wants to buy an annuity that will provide him with $85,000 of income a year for 25 years, with the first payment coming immediately. The going rate on such annuities is 5.15%. How much would it cost him to buy the annuity today?

a. $1,063,968

b. $1,119,966

c. $1,178,912

d. $1,240,960

e. $1,303,008

27. You inherited an oil well that will pay you $25,000 per year for 25 years, with the first payment being made today. If you think a fair return on the well is 7.5%, how much should you ask for it if you decide to sell it?

a. $284,595

b. $299,574

c. $314,553

d. $330,281

e. $346,795

28. Sam was injured in an accident, and the insurance company has offered him the choice of $25,000 per year for 15 years, with the first payment being made today, or a lump sum. If a fair return is 7.5%, how large must the lump sum be to leave him as well off financially as with the annuity?

a. $225,367

b. $237,229

c. $249,090

d. $261,545

e. $274,622

29. What’s the present value of a 4-year ordinary annuity of $2,250 per year plus an additional $3,000 at the end of Year 4 if the interest rate is 5%?

a. $8,509

b. $8,957

c. $9,428

d. $9,924

e. $10,446

30. Suppose you inherited $275,000 and invested it at 8.25% per year. How much could you withdraw at the end of each of the next 20 years?

a. $28,532

b. $29,959

c. $31,457

d. $33,030

e. $34,681

31. Your uncle has $375,000 and wants to retire. He expects to live for another 25 years and to earn 7.5% on his invested funds. How much could he withdraw at the end of each of the next 25 years and end up with zero in the account?

a. $28,843.38

b. $30,361.46

c. $31,959.43

d. $33,641.50

e. $35,323.58

32. Your uncle has $375,000 and wants to retire. He expects to live for another 25 years, and he also expects to earn 7.5% on his invested funds. How much could he withdraw at the beginning of each of the next 25 years and end up with zero in the account?

a. $28,243.21

b. $29,729.70

c. $31,294.42

d. $32,859.14

e. $34,502.10: