Question

You have earned a pension worth $2,000 a month, you think you will live and additional...

You have earned a pension worth $2,000 a month, you think you will live and additional 15 years. The current prevailing interest rate is 2% per year. What is the current market value of your pension?

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Answer #1

Information provided:

Monthly pension= $2,000

Time= 15 years*12= 180 months

Interest rate= 2%/12= 0.1667% per month

The current value of the pension is calculated by computing the present value.

Enter the below in a financial calculator to compute the present value:

PMT= 2,000

N= 180

I/Y= 0.1667

Press the CPT key and PV to compute the present value.

The value obtained is 310,796.11.

Therefore, the current value of the pension is $310,796.11.

In case of any query, kindly comment on the solution.

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