Question

A retirement policy offers 20 yearly payments of 200,000/= beginning at the age 

of 65. What would be the cash equivalent of these payments if money can earn 

interest at an annual rate of interest of 8% compounded annually?

Answer 1

The cash equivalent of 200000 for the next 20 years, using the formula

$FV=PV [\frac{{(1+r)^{n}-1}}{r}]$

Where $FV$ is the cash equivalent

$n$ is the number of years

$r$ is the interest rate and

$PV$ is the present value

$FV=200000 [\frac{{(1+0.08)^{20}-1}}{0.08}]$

$\therefore$ $FV=9152392.86$