Your Uncle Is About to Retire,and He Wants to Buy

question 106

Multiple Choice

Your uncle is about to retire,and he wants to buy an annuity that will provide him with $57,000 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) $827,207.28
• B) $856,488.95
• C) $732,041.84
• D) $915,052.30
• E) $717,401.00

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Definitions:

Market Outcomes

The results or final state of market processes, including price and quantity determined by supply and demand forces.

Price Floor

A minimum price set by the government or a regulatory body, below which a good or service cannot be sold in the market.

Compact Discs

Optical discs used to store digital data, primarily known for storing music recordings in a digitally encoded format.

Surplus

A condition in which the amount of a good offered for sale by producers is greater than the amount that buyers will purchase at the existing price. A decline in price would eliminate the surplus.