Assume that Social Security promises you $32,000 per year starting when you retire 45 years from today (the first $32,000 will get paid 45 years from now). If your discount rate is 4%, compounded annually, and you plan to live for 14 years after retiring (so that you will receive a total of 15 payments including the first one), what is the value today of Social Security's promise?
Assume that Social Security promises you $32,000 per year starting when you retire 45 years from today (the first $32,000 will get paid 45 years from now). If your discount rate is 4%, compounded annually, and you plan to live for 14 years after retiring (so that you will receive a total of 15 payments including the first one), what is the value today of Social Security's promise?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Assume that Social Security promises you $32,000 per year starting when you retire 45 years from today (the first
$32,000 will get paid 45 years from now). If your discount rate is 4%, compounded annually, and you plan to live for
14 years after retiring (so that you will receive a total of 15 payments including the first one), what is the value today
of Social Security's promise?
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