Question

A retired person is depending on a monthly annuity income to finance his expenses. The greatest risk faced by his cash flows is

1) Business Risk
2) Exchange Rate Risk
3) Interest Rate Risk
4) Inflation Risk​

Answer 1

Answer:

Exchange Rate Risk

Explanation:

Because

Answer 2

• A retired person who is depending on monthly annuity income to finance his expenses faces the risk of Inflation.
• Inflation reduces the purchasing power of the people which means they can’t buy the same amount of goods which they used to buy with the given cash. It makes your cash less powerful.
• Since a retired man had invested in a monthly annuity during his working days but with the increase of price for basic necessities like food, gas and oil it is very risky for them.