A 60-Year-Old Woman Can Purchase Either of the Following Annuities

question 63

Short Answer

A 60-year-old woman can purchase either of the following annuities from a life insurance company for $50,000. A 30-year term annuity will pay $367 at the end of each month. A life annuity will pay $405 at the end of every month until the death of the annuitant. To what age must the woman survive for the life annuity to have the greater economic value? Assume that money can earn 8% compounded monthly.

---

Definitions:

Psychoanalysis

A therapeutic approach founded by Freud that aims to explore unconscious conflicts driving behavior through techniques like dream analysis and free association.

Client-centered Therapy

A form of psychotherapy developed by Carl Rogers that emphasizes providing a supportive environment in which clients can enhance their self-understanding and adjust their behavior.

Cognitive Therapy

A form of psychotherapy that emphasizes the importance of thought patterns in determining emotions and behaviors.

Psychoanalytic Therapy

A therapeutic approach developed by Freud that aims to explore unconscious conflicts and emotional issues from one's past.