Finance and Accounting

1. Suppose the board were going to invest in an ordinary annuity requiring a payment of $10,000 over the next five years with an interest rate of 5%. What is the future value of this ordinary annuity investment?

2. The board is considering other options for investing as well. For example, they want to double their investment of $70,000 over the next 12 years by using conventional securities with a projected return of 6%. Does the present value of the investment indicate that this is possible?

3. Cosgrove and O’Connor (2009) argue that rapidly changing investment landscape poses a problem for consumers earning revenue from investing. After reading Cosgrove and O’Connors article and doing additional research, respond to the following questions: What are the criteria you, acting in a fiduciary capacity as a trustee for your clients, should examine in considering annuities? What are the common characteristics of variable annuity and equity-indexed annuity? Why did the federal government classify equity-indexed annuities as securities under the federal securities laws? Who does it benefit? List and identify five key issues for a clients investment in, or sale of, variable annuities and/or equity-indexed annuities.

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