Question

Karen is now age 70 (at time 0).

For the following questions, you should use the following Life Table and 5% p.a. interest. You may assume that all deaths are independent events.

Age x	lx
70	150
71	140
72	125
73	105
74	80
75	50
76	40
77	30
78	20
79	10
80	0

If she lives until age 73, she will be entitled to receive a lifetime pension of $25,000 per annum. The first payment will be made on her 73rd birthday (if she is alive at that time); and she will receive payments annually on each subsequent birthday, as long as she is alive at that time.

What is the present value (at time 0) of Karen's expected payments?

Answer:

Answer 1

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