Elvira Is Considering Buying a 20-Year Ordinary Annuity to Provide

question 59

Multiple Choice

Elvira is considering buying a 20-year ordinary annuity to provide her with retirement income.The annuity will make annual payments of $25,000.If her opportunity cost is 7%,what is the maximum she should pay for the annuity?

• A) $1,096,629.42
• B) $1,024,887.31
• C) $283,389.88
• D) $264,850.36

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Definitions:

Illusion of Invulnerability

An overconfidence bias where a group underestimates risks, leading to over-optimistic decision-making.

Ethical Consequences

The outcomes or impacts on morality and ethical principles resulting from specific actions or decisions.

Ad Hoc Committee

A temporary committee formed for a specific task or objective and dissolved after its completion.

Organization

An arranged group of people with a particular purpose, such as a business, government body, or charity.