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QUESTION

Two annuities are available for purchase that your client has identified. The first annuity pays $7,000 each six-month period over a 5 year period,...

Two annuities are available for purchase that your client has identified. The first annuity pays $7,000 each six-month period over a 5 year period, at a nominal rate of 9% p.a. The annuity has an annual fee of $300, paid at the beginning of each year.

The second annuity pays $1,000 each month, again over 5 years at a nominal rate of 10% p.a. and does not have an annual fee.

If each of the annuities cost $50,000, identify which of the annuities you would recommend to your client.

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