How high would the equivalent lump sum payment have to be

Reference no: EM133377630

Question: To insure you, Assurances Nochance Ltd offers the following plan: you will pay 20 annual payments of $8,000 starting one year from today. Then, in year 21, you or your heirs will receive a pension for the following 15 years. The discount rate used by the company to calculate your pension is 6%.

(a) What is the size of your annual pension?

(b) If you could take a one-time lump sum payment 25 years from today instead of the pension, how high would the equivalent lump sum payment have to be?

Reference no: EM133377630

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