An actuary has been asked to join a secret committee of the Rugby Football Union of...

 

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An actuary has been asked to join a secret committee of the Rugby Football Union of one of the countries participating in the World Cup. The task of the committee is to determine the cost of financial packages for players should rugby union become professional. The proposed salary package (per player) commencing 1 July 1995 and lasting for exactly 3 years is as follows: R10 000 per month in arrear for the first year, R12 500 per month in arrear for the second year, R16 000 per month in arrear for the third year. The actuary is required to calculate the present value of the above package as the Union wishes to invest part of the profits from the World Cup as a lump sum that can finance in its entirety packages for all key players. Find the present value as at 1 June 1995 of a single package, assuming that money can be invested at: 24% per annum payable monthly for the period 1 June 1995 to 30 June 1996. 21% per annum convertible 3 times p.a. for the period 1 July 1996 to 30 June 1997. 15% per annum for the period 1 July 1997 to 30 June 1998. An actuary has been asked to join a secret committee of the Rugby Football Union of one of the countries participating in the World Cup. The task of the committee is to determine the cost of financial packages for players should rugby union become professional. The proposed salary package (per player) commencing 1 July 1995 and lasting for exactly 3 years is as follows: R10 000 per month in arrear for the first year, R12 500 per month in arrear for the second year, R16 000 per month in arrear for the third year. The actuary is required to calculate the present value of the above package as the Union wishes to invest part of the profits from the World Cup as a lump sum that can finance in its entirety packages for all key players. Find the present value as at 1 June 1995 of a single package, assuming that money can be invested at: 24% per annum payable monthly for the period 1 June 1995 to 30 June 1996. 21% per annum convertible 3 times p.a. for the period 1 July 1996 to 30 June 1997. 15% per annum for the period 1 July 1997 to 30 June 1998.

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Calculate the present value of the salary package using the given interest rates for each period For ... View the full answer