Comparing Excel Annuity Pricing with Market Prices | RMIN 5110

School: University Of Georgia - Course: RMIN 4000 - Subject: Accounting

RMIN 5110: Employee Benefits Spring 2023 Dr David McCarthy ASSIGNMENT 6 Name:____________________________________ This exercise allows us to compare the method of pricing annuities in Excel that I have taught you with true market prices that we can get from annuity quote engines available online.Follow the instructions on the next page.

Page 2RMIN 5110 McCarthy Spring 20231.Take the first letter of your name and turn it into a number (A = 1; B = 2; C = 3 etc). Write the number below. _____ 2.Take the first letter of your surname and turn it into a number (A = 1; B = 2; C = 3 etc). Write the number below. _____ 3.Get your fake age by adding your first number above, your second number above and 38. So I am D = 4 + M = 13 +38 = 55.Write your fake age below. _____ 4.If you are male, write'Female'below.If you are female, write'Male'. _____ 5.Go towww.immediateannuities.com. Fill in the form with your fake age, fake gender. For'income start date', pick'immediately'.For amount to invest, fill in $1,000,000.For 'state'pick GA.Click"Get my quote"and write the highest number here. _____ 6.Calculate the annuity factor implied by this answer as follows.The annuity factor is the amount of money you would need to buy an annual income of $1.To calculate it, take the annuity purchase price ($1,000,000), divide it by the best quote, and divide by 12 (to convert from monthly to annual income).Write your market annuity factor below: _____ 7.Use the spreadsheet on ELC to calculate the fake annuity factor using your fake age and gender.Write it below: _____ 8.Calculate the implied error in your fake annuity factor calculated by the spreadsheet relative to the actual market annuity factor.Do this by taking the fake annuity factor and dividing it by the market annuity factor.Subtract 1 and multiply by 100.Write the implied error below: