Variable Annuity Comparison

My 80-year old mother’s financial advisor just sent me this email. A few years ago he recommended an annuity, so I’m not sure I can trust his advice. What do you think he intends to do, and is it reasonable?

I would suggest that we move 100K of the almost 400K that will be earning 4.1% in her savings account. My recommendation would then be to allocate 40K into each of the two programs that I would recommend. One is yielding 6.2% and the other 6.3%. We would leave the remaining 20K in money market (currently earning 4.5% but will fluctuate and is subject to change as rates change). My objectives for these investment recommendations are preservation of principal, steady income, and capital appreciation on the back end of the program. Our total return target over the life of the program is an annualized total return of 9% -10%. There is no commission, load or ongoing fee paid by the client to go into these programs so the yield is a net yield.
Thanks for everything so far! Here’s more:
There are several investment programs with which I work that are direct investment programs that are non-correlated to the stock market or to the bond market, are non-traded and therefore do not change in value (share price is stable at $10.00) and are earning yields of 6.2% and 6.3%. We can re-invest the dividends or have the dividends swept into a money market.

I recently went to what the company calls a “corporate overview” where they discuss what the company is about, career opportunities, compensation and the like. They offer training (which I have to pay for; something that was left out of the presentation) to become a licensed financial planner selling annuities, bonds, life insurance…. I’ve done my research and a lot of hits came up that point to this being a scam but it’s difficult to find credible sources. Just wondering if anyone has had exposure to this company in any form and their thoughts on it. Thanks in advance for the replies, they’re greatly appreciated.
website: www.wfg-online.com

A sinking fund is established by a couple so that they will have $80,000 for their daughter’s college education. They are to make monthly payments for ten years, when the fund is to be worth $100,000. If the interest rate they get is 7.2% compounded monthly, what should be the monthly payment?

I probably have 25 to 30 more years to live. I have been advised to put $100,000 into an annuity which would pay $708 per month for life and leave nothing when I die. Is this a good idea?

I have my Iowa life insurance license and want to specialize in selling annuities thru seminars and lead cards. I am looking for someone to mentor me and train me. If any one has any good advise or connections with this industry please let me know.

This question is related to all these questions. Yahoo did not give me enough space to explain it all. Try & read in order.1. http://answers.yahoo.com/question/index?qid=20060905135601AARhX7H

2. http://answers.yahoo.com/question/index;_ylt=AkdNaoF0InsHX4vReFTmKQXzy6IX?qid=20060915163938AAen9C3
Well which is it? We have lost $1.2 million over 8 years following this rolling period story. If we follow this story over the next 15 or 20 years with an income draw of 3% or 4% how much will we lose? How about when we will go broke? No way! We want guarantees that we will not go broke? We want guarantees that we will live very well in retirement.This is why annuities work for us and why we will do only a small percentage in index stocks.

3. http://answers.yahoo.com/question/index;_ylt=AoDfSxrELIvWzXoyoPMhPlbzy6IX?qid=20060915163237AAoeMk3
These annuities have no chages or fees I get all that I listed. in other question.
Risk story is not true we lost $1.2 million.
Read all the backgroud from all links!
What negative return Jeff. Did you read what I did?
$479,905 got us $5,000 a month for 10 years
$913,030 got us $5,000 a month for as long as we both live

Of the $10,000 a month $6,560 is tax free

$500,000 at 5.10% for 5 years will be $641,185 in 5 years
$500,000 at 5.25% for 10 years will be $834,000 in 10 years

All interest is not taxed unless we take it out. These rates are guaranteed not to change.

Next is where our interest we earn depends on a stock market index.

$750,000 in a 7 year index annuity

$750,000 in a 14 year index annuity – this one gave us a $75,000 bonus and it’s in our account now.

What about all the tax savings. Do the math!
Van Jon – Financial Advisors lost $1.2 million of our hard earned money in 8 years. I don’t want others to get hurt! Annuities are a better way!

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In my finance class we’re doing annuities and I need to know when to set my calculator to BEG and when I should set it on END.

HELP pass SERIES 6 EXAM – regarding the investments / annuitites/ retirement area..I am preparing and studing for the SERIES 6 EXAM. Need any suggestions..advice to pass the EXAM please. I have read the material (over & over) and have ordered 4 seperate study books as well as online exams & tutorial ..but the subject(s) in the SERIES 6 seems hard to comprehend. ( like learning a foreign language )
Please need HELP PASSING THE SERIES 6. when i earn a 80% on the at home tutorial exam then i will attempt the real SERIES 6 exam just need a 70 to pass. Anyone passed it the 1st time..how many times before you passed? THANK YOU for anyof you kind advice..recommendations.. please enlighten me. Thanks again!!

a. it emphasizes earning a return on invested capital
b. it recognizes that earning a return makes $1 worth more today than $1 received in the future
c. it can be applied to future cash flows in order to compare different streams of income
d. all the above

As the discount rate becomes higher and higher, the present value of inflows approaches…
a. 0
b. minus infinity
c. plus infinity
d. need more information

You are to receive $12,000 at the end of 5 years. The available yield on investments is 6%. Which table would you use to determine the value of that sum today?

a. Present value of an annuity of $1
b. Future value of an annuity
c. Present value of $1
c. Future value of $1

As the interest rate increases, the present value of an amount to be received at the end of a fixed period…
a. increases
b. decreases
c. remains the same
d. not enough information to tell

As the time period until receipt increase, the present value of an amount at a fixed interest rate…
a. decreases
b. remains the same
c. increases
d. not enough information to tell

Mr Blochins is creating a college investment fund for his daughter. He will put in $850 per year for the next 15 years and expects to earn an 8% annual rate of return. How much money will his daughter have when she starts college?
a. $11,250
b. $12,263
c. $24,003
d. $23,079

Mr. Nailor invests $5,000 in a certificate of deposit at his local bank. He receives annual interest of 8% for 7 years. How much interest will his investment earn during this time period?
a. $2,915
b. $3,570
c. $6,254
d. $8,570

Sharon Smith will receive $1million in 50 years. The discount rate is 14. As an alternative, she can receive $2,000 today. Which should she choose?
a. the $1 million dollars in 50 years
b. $2,000 today
c. She should be indifferent
d. need more information

Mr. Fisher wants to build a house in 10 years. He estimates that the total cost will be $170,000. If he can put aside $10,000 at the end of each year, what rate of return must be earn in order to have the amount needed?
a. between 11% and 12%
b. between 8% adn 9%
c. 17%
d. none of the above

The shorter the length of time between a present value and its corresponding future value…
a. the lower the present value, relative to the future value.
b.the higher the present value, relative to the future value.
c.the higher the interest rate used in the present-valuation.
c. none of the above

A dollar today is worth more than a dollar to be received in the future because…
a. the dollar can be invested today and earn interest
b. of the risk of nonpayment in the future
c. inflation will reduce purchasing power of a future dollar
d. none of the above

The higher the rate used in determining the future value of a $1 annuity…
a.the smaller the future value at the end of the period.
b. the greater the future value at the end of a period.
c. the greater the present value at the beginning of a period.
d. None of the above – the interest has no effect on the future value of an annuity.

Mr. Darden is selling his house for $165,000. He bought it for $55,000 nine years ago. What is the annual return on his investment? …
a. 3%
b. Between 14% and 16%
c. 13%
d. none of the above

$170K in an annuity which I can start getting a guaranteed income in 7 years to last 30 years (and able to withdraw after 7 years without a penalty). Is that sound advice? I am very new to this so any help would be greatly appreciated.

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I am going over a question that provides somewhat of a solution, but I can’t figure out what I need to punch into my financial calculator to give me the same answer.

1. Your cousin just came home from a poker tournament in Las Vegas and is now trying to
pay off a gambling debt of $5,000. You have agreed to pay off the debt for him today,
and in return he has agreed to pay you $250 per month over the next two years with
payments beginning immediately. What is the effective annual interest rate you are
charging him?

A) 19.75%
B) 19.86%
C) 21.77%
D) 22.26%
E) 23.45%

Answer C
5,000 = 250 x PVIFA (i,24) x (1+i) because it is an annuity due
Solve for i using your financial calculator: i = 1.6550%
EAR = (1 + im )m -1 = (1.01655)12-1 = 21.77%

Yes the solution is provided, but I can’t figure out how to solve for i using my financial calculator.

A project under consideration costs $750,000, has a 5-yr life, and has no salvage value. Depreciation is straight-line to zero.The required return is 17%,and the tax rate is 34%.Sales are projected at 500 units per yr.Price per unit is $2,500,variable cost per unit is $1,500,and fixed costs are $200,000 per yr.
A)Suppose you think that the unit sales,price,variable cost,and fixed cost projections given here are accurate to within 5%.What is the base-case NPV? What are the best and worse case scenario NPVs?
Ok in the book this is what it reads:(I’ll only give you best-case b/c I won’t have enough space to write it here. Hopefully I will know what to do with the others)Depreciation is $150,000 per yr. At 17%,5 yr annuity factor is 3.19935
Best Case
Unit Sales=525
Unit Price=2,625
Unit Variable Cost=1,425
Fixed Cost=190,000
Cash Flow=341,400
So my question is how did they get 341,400 as the cash flow, and how did they get 3.19935 as the annuity factor?
For the 3.19935, how do I use a calculator? What do I need to key in?