An employee's compensation includes an annuity with 6 annual payments that pays $95,000 at retirement, with...
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An employee's compensation includes an annuity with 6 annual payments that pays $95,000 at retirement, with each subsequent payment growing by 3%. The firm's policy is to pre-fund such annuities one year before retirement. At an interest rate of 4%, how much would the firm need to invest? Equivalent problem structure (in neutral time-value-of-money terms): What is the present value of a series of payments received each year for 6 years, starting with $95,000 paid one year from now and the payment growing in each subsequent year by 3% ? Assume a discount rate of 4%. 4 An employee's compensation includes an annuity with 6 annual payments that pays $95,000 at retirement, with each subsequent payment growing by 3%. The firm's policy is to pre-fund such annuities one year before retirement. At an interest rate of 4%, how much would the firm need to invest? Equivalent problem structure (in neutral time-value-of-money terms): What is the present value of a series of payments received each year for 6 years, starting with $95,000 paid one year from now and the payment growing in each subsequent year by 3% ? Assume a discount rate of 4%. 4
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To calculate the present value of the annuity we need to find the value of each payment at the time ... View the full answer
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date:
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