Task: Annuities and Interest Rates. Professor's Annuity Corp. offers a lifetime annuity to retiring professors. For a payment of $80,000 at age 65, the firm will pay the retiring professor $600 a month until death.
Question 1: If the professor's remaining life expectancy is 20 years, what is the monthly rate on this annuity?
What is the effective annual rate?
Question 2: If the monthly interest rate is .5 percent, what monthly annuity payment can the firm offer to the retiring professor?