On 1 Jan 2007, Peter celebrates his 30 year old birthday. As a birth commitment, Peter joins a 15 year-contribution Annuity Plan. The annual contribution will be fixed at $28,800 for 15 years. The first annual premium is payable on 31 Dec 2007. Peter chooses to retire at age 60.The Annuity Plan pays a fixed amount every year forever after he retires. The payment from the Annuity Plan will be made at the end of each year. Assuming the long term interest rate is 4.84% per annum. All calculation is based on this rate.
a) What is the sum of gross amount of money that Peter contributes?
b) What will be the future value of the annuity when Peter becomes 45 years old (i.e. the day
after he will have paid the last premium)?
c) What will be the future value of the annuity when Peter celebrates his 60 year old birthday?
d) How much Peter could receive every year from the Annuity Plan after he retires?
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Elain, Ming, Wong: We don't do homework for you. If you show thinking or work, we will generally critique it.
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