Mr Sam gets annual pension payments for the next 30 years. After the first payment, each subsequent annual benefit will be adjusted upwards to reflect impact of inflation. You are given: (i) The first benefit is 44,000 and will be paid one year from today. (ii) The inflation rate is 1.6% per year forever. At an annual effective interest rate of 8.5%, what is the current value of the pension?

Mr Sam gets annual pension payments for the next 30 years. After the first payment, each subsequent annual benefit will be adjusted upwards to reflect impact of inflation. You are given: (i) The first benefit is 44,000 and will be paid one year from today. (ii) The inflation rate is 1.6% per year forever. At an annual effective interest rate of 8.5%, what is the current value of the pension?

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

ChapterA: Appendix - Time Value Of Cash Flows: Compound Interest Concepts And Applications

Section: Chapter Questions

Problem 12E

See similar textbooks

Similar questions

Aunt May will start receiving quarterly pension ($5000 quarterly paycheck) beginning one quarter from now. The pension will continue for the next 25 years. The quarterly paycheck will increase by 5% each year to adjust for inflation. What is the total value of Aunt May's pension as of today, assuming a nominal interest rate of 6% compounded monthly? A. Between $350,000 and $380,000 B. Between $380,000 and $400,000 C. Between $400,000 and $420,000 D. Between $420,000 and $440,000 E. More than $440,000
A retirement plan investment guarantees to pay you, or your estate, a fixed amount each year for 20 years. At the time of retirement, you will have accumulated $310,360 to your credit in the plan. The plan anticipates earning 8% interest annually over the period you or your estate will receive the retirement benefits. Rounding to the nearest $10, how much will the annual retirement benefits payment be assuming the first payment occurs one year from your retirement date?
Your pension plan is an annuity with a guaranteed return of 4% per year (compounded quarterly). You can afford to put $1,600 per quarter into the fund, and you will work for 40 years before retiring. How much money (in dollars) has accumulated in the retirement fund when you retire? (Round your answer to the nearest cent.) $ After you retire, you will be paid a quarterly pension based on a 25-year payout. How much (in dollars) will you receive each quarter? (Round your answer to the nearest cent.)
After retirement, you expect to live for 25 years. You would like to have a $95,000 income each year. The annual interest rate is 9 percent per year. Required: Calculate the amount of savings you have in your retirement account to receive this income. A) Assume that the payments start on the day of your retirement. B) Assume that the payments start one year after the retirement.
Susan Co expects to receive P20,940 at the beginning of each period per year in Social Security payments. Assume that she receives these payments for 28 years and use a rate of 6% per year. Find the present value of her retirement payments.
You would like to have enough money saved to receive a $90,000 per year perpetuity after retirement. The annual interest rate is 8 percent. Required: How much would you need to have saved in your retirement fund to achieve this goal? a) Assume that the perpetuity payments start on the day of your retirement. b) Assume that the perpetuity payments start one year from the date of your retirement.
Kenneth decides to put away an amount of R400,00 for 15 years, at the end of every month, towards a retirement annuity that earns interest at 10% per year, compounded monthly. Determine the present value of the annuity?
You will pay into a pension fund until you are aged 65. You are expected to live until your 80th birthday. You are currently 21 years of age. Pension fund contributions are made bi-weekly (use n=2/52) beginning in 2 weeks' time. If you are promised an interest rate of 7% compounded monthly: 1) What should be the size of your contribution if you plan to have $1 million at age 65? 2) Following your final contribution at age 65, you will retire. You will begin to withdraw money at the end of each month at a declining rate. Each subsequent withdrawal will fall by a constant rate of 0.5% per month for the duration of your life. You withdraw the final payment an instant before you die. If the effective annual rate of interest that you can receive on your pension fund is 5%, what is the most that you can withdraw on your first payment? 3) If your contribution is $100.00 bi-weekly, what is the future value of your pension fund immediately after the last payment if the prevailing interest…
After retirement, you expect to live for 25 years. You would like to have a $95,000 income each year. The annual interest rate is 9 percent per year. Required: Calculate the amount of savings you have in your retirement account to receive this income. 1 Assume that the payments start on the day of your retirement. 2.Assume that the payments start one year after the retirement.
A retirement plan guarantees to pay to you or your estate a fixed amount for 20 years. At the time of retirement you will have $250,000 to your credit in the plan. The plan anticipates earning 9% interest compounded monthly. How much will your monthly benefits be, paid at the end of each month?
What are the monthly payments you will receive if your retirement nest egg of $ 1,000,000 is in a 5% annuity that lasts 20 years if you receive payments at the beginning of each month?
An engineer is entitled to receive P25,000 at the beginning of each year for 18 years. If the rate of interest is 4% compounded annually. 1. What is the present value of this annuity at the time he is supposed to receive the first рayment? 2. What is the sum of this annuity at the end of the 18th year? 3. Find the difference between the sum of this annuity which is paid at the beginning of each year and an annuity paid at the end of each year. Ans. 1. Р329,141.72 2. Р666,780.73 3. Р25,645.41