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What is the value today of the superannuation fund

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Question - You are planning to retire exactly sixty years from today (i.e. at t=60t=60). Assume that your superannuation fund promises you a pension of $41,000 per year for as long as you are alive. The first of these payments is made to you on the same day as your retirement. Assume that the appropriate discount rate for these payments is 5.00% per annum compounded annually.

You plan to live for around fourteen years after retiring, such that you will be alive long enough to collect a total of payments from the superannuation fund. For the purposes of this question, assume that upon your death there is no residual value paid by the superannuation fund to your estate.

What is the value today (i.e. at t=0) of the superannuation fund's promise to you given the above assumptions?

Reference no: EM133018998

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