Math Problem Statement

. An annuity is payable annually in arrears for the lifetime of a woman currently aged exactly 68. The first annuity payment, due in one year’s time, will be £2,000, and thereafter the payments will increase at the rate of 2.5% per annum compound. Calculate the expected present value of this annuity, assuming that mortality follows the PFA92C20 table and that the effective annual interest rate is 6.6%.

Solution

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Math Problem Analysis

Mathematical Concepts

Annuities
Compound Interest
Probability
Discounting

Formulas

Present Value of Annuity Formula
Compound Interest Formula
Discount Factor Formula

Theorems

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Suitable Grade Level

Advanced