At the beginning of 1965, Mr. A, 47 yrs old, signed a contract with Mrs. C, who claimed to be 90 years old: he would pay her 30,000 French Francs at the end of each year until she died, at which point he would inherit her Paris apartment. Assuming a 90yr old woman has a 40% chance of living 4 years (four payments), and a 60% chance of living 5 years (five payments), and an 8% discount rate. Mr. A died 30 years later, in 1995, at the age of 77. His children continued making payments after he died because Mrs. C survived until the end of 1997 (supposedly at the age of 122). A) What would the PV of the contract have been (in 1965) if one knew there would be 33 payments? B) What was the Future Value of this contract at the end of 1997?
F4.
At the beginning of 1965, Mr. A, 47 yrs old, signed a contract with Mrs. C, who claimed to be 90 years old: he would pay her 30,000 French Francs at the end of each year until she died, at which point he would inherit her Paris apartment. Assuming a 90yr old woman has a 40% chance of living 4 years (four payments), and a 60% chance of living 5 years (five payments), and an 8% discount rate.
Mr. A died 30 years later, in 1995, at the age of 77. His children continued making payments after he died because Mrs. C survived until the end of 1997 (supposedly at the age of 122). A) What would the PV of the contract have been (in 1965) if one knew there would be 33 payments? B) What was the
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