T3 EIC 8 (Tutorial)

Your final meeting is in product development. Berkshire

Hathaway wishes to develop a new annuity product for retirees, to provide a

regular annual

income after retirement. This is achieved by the retiree taking out their

superannuation (retire savings) out in a lump sum and depositing it with the

fund. This lump sum investment will be invested in a portfolio that returns 6%

per annum. These returns, along with the original investment amount, will be

drawn down (paid out) at the end of each year to provide retirement income.

The aim is to provide $80,000 annually, for 20 years. How much

(superannuation lump sum) would a retiree need to have at the time

of retirement to deposit into this product? Sales can than provide this

information to potential customers.