Question 1
If annual interest rates on comparable investments are 3.5%,
(a) What would be a reasonable price to pay for an annuity paying £17,500 a year for the next 25 years?
(b) What annual income could be expected by someone who had saved £350,000 in their personal pension fund and spent it all on a 20 year annuity?
Question 2
If a savings account pays an AER of 5% :
(a) How much would be accumulated if you put £100 into this savings account on the first day of every month for 5 years?
(b) If you wanted to have £25,000 at the end of 8 years, how much would you have to put into this savings account each month?