[invested_4]

Your search for a local bank advertises the following deal: "pay us $100.00 dollars a year for 10 years and then we will pay you (or your beneficiaries) $100 a year forever." Is this a good deal if the interest rate available on other deposits is 6 percent? Did not match with any Web results.

[RickJ]

The "$100 for life" thing is a ripoff.

$100 at 6% compounded once per year you have $1576 after 10 years... then after that - with no further investment - the interest per year is nearly $100 (6% of $1576 is $94)

So your totals:

Year 11 $1670 or $100
Year 12 $1770 or $200
Year 13 $1870 or $300
etc...

[CaptainForest]

Actually, it is a good deal. Although at only $100, perhaps not.

After 10 years, the accumulated value is 1576 (according to rick). To then buy a perpetuity for 100 a year for life would cost you 1,666.66

So therefore, you are getting an annuity for a bit cheaper than it is worth.

Calculation of a Perpetuity
PV = Amount / Interest
PV = 100 / 0.06
PV = 1,666.66

[fredg]

Hi,
This sounds like the old "Christmas Club" many banks advertise, or use to. You put in a little, get paid little or no interest, and don't really make anything on your investment!