Gavin’s grandfather, Mr. Jones, has just turned 90 years old and is applying for a lifetime annuity that will pay $10,000 per year, starting 1 year from now, until he dies. He asks Gavin to analyze it for him. Gavin finds that according to statistical summaries, the chance (probability) that Mr. Jones will die at any particular age is as follows:.
age90 91 92 93 94 95 96 97 98 99 100 101 probability 07 08 09 10 10 10 10 10 10 07 05 04
Then Gavin (and you) answer the fullowing questiuns:.
(a) Wha is the life expectancy of Mt Jones?
(b) what is uhe present value of an annuity at 8% interest that has a lifetime equal to Mr Jones's litc expectancy7 (For an annuity of a nonintegral number of years, use an averaging metliud )
(c) What is the expected present value of the annuity?
Answers: 2
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Gavin’s grandfather, Mr. Jones, has just turned 90 years old and is applying for a lifetime annuity...
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