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Calculate the amount of the annuity

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Question - Assume that a pension plan offers to pay $500,000 on a person's retirement (his/her sixty-fifth birthday) or a quarterly annuity for the remainder of the person's life - i.e., starting 3 months from the date of retirement and including his/her date of death. Interest rates are 8 percent compounded semi-annually, and a person's life expectancy has been determined statistically as being 85 years. Calculate the amount of the annuity that would make a person indifferent between the options?

Reference no: EM132980905

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