Question: Calculate the following:
a. Calculate the annual cash flows (annuity payments) from a fixed-payment annuity if the present value of the 20-year annuity is $1 million and the annuity earns a guaranteed annual return of 10 percent. The payments are to begin at the end of the current year.
b. Calculate the annual cash flows (annuity payments) from a fixed-payment annuity if the present value of the 20-year annuity is $1 million and the annuity earns a guaranteed annual return of 10 percent. The payments are to begin at the end of five years.
c. What is the amount of the annuity purchase required if you wish to receive a fixed payment of $200,000 for 20 years? Assume that the annuity will earn 10 percent per year.