How much can take out each month

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Problem 1: All County Insurance, Inc. promises to pay Ted $1 million on his 65th birthday in return for a one-time payment of $70,000 today. (Ted just turned 20.) At what rate of interest would Ted be indifferent between accepting the company's offer and investing the premium on his own?

Problem 2: For your retirement, you want to invest $10,000 today and $1,000 each month for 40 years at 12%. If you plan to live another 30 years after retirement, how much can you take out each month if you start withdrawing 1 month after retirement? You want to leave 500 thousand as a death benefit. Interest rates are still 6%, and for the month of retirement, you want to live on 50,000.

Reference no: EM132976666

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