Use your age or a close age within three years of your current age and assume you will retire at the age of 67. Assume you will receive a pension at the age of 67 of $10,000 per month for life. Assume life for a man is estimated at 83 and a woman at 87 years of age. Using the actuarial estimates given above answer the following;
1) What is your estmated present value of your lifetime pension annuity in today' s dollars? (hint-pv of an annuity starting at retirement age and then pv of that annuity in today's $s.
2) What is the present value today of $10,000 per month that you will receive when you are 67?
3) What discount (interest rate) factor did you use to discount future dollars to today's dollars and why? There is no right or wrong answer and even actuaries have to adjust their numbers annually at times.