_BaadShah_
Member
- Joined
- Aug 11, 2003
- Messages
- 60
- Gender
- Male
- HSC
- 2005
hey everyone..
sorry to bother everyone but i am really finding it difficult to do this questions, just if someone can help it be much appreciated:
Imagine that you want to purchase a level (non-escalating) annuity with regular yearly payment P and a
term of 20 years, with the first payment made immediately upon retirement. This annuity needs to
replace 60% of your final salary of $100,000 per annum.
(a) How many dollars per year does P represent?
(b) Assuming the interest rate is 3.5% per annum, use the formula for the ‘present value of an
annuity due’ to calculate how much the required annuity will cost.
(c) If an individual is to accumulate the amount calculated in (b) over a period of 30 years with a
constant salary of $100,000, what needs to be the contribution rate? Assume the contributions
are made annually at the end of each year and the net annual return is 3.5%.
sorry to bother everyone but i am really finding it difficult to do this questions, just if someone can help it be much appreciated:
Imagine that you want to purchase a level (non-escalating) annuity with regular yearly payment P and a
term of 20 years, with the first payment made immediately upon retirement. This annuity needs to
replace 60% of your final salary of $100,000 per annum.
(a) How many dollars per year does P represent?
(b) Assuming the interest rate is 3.5% per annum, use the formula for the ‘present value of an
annuity due’ to calculate how much the required annuity will cost.
(c) If an individual is to accumulate the amount calculated in (b) over a period of 30 years with a
constant salary of $100,000, what needs to be the contribution rate? Assume the contributions
are made annually at the end of each year and the net annual return is 3.5%.