Eleni, who is now 55 years old, is employed by a firm that guarantees her a pension of $40,000/year at age 65. What is the present value of her first year's pension if inflation over the next 10 year(s) is at the given rate. Assume that inflation is continuously compounded. 4% _________
8% _________
19% _________
A) $32,749.23, $34,142.61, $5,982.74
B) $32,749.23, $32,749.23, $5,982.74
C) $32,749.23, $32,749.23, $34,142.61
D) $26,812.80, $17,973.16, $5,982.74

Question

Quizplus · Accepted Answer

The present value is calculated using the formula PV = FV / e^(rt), where FV is the future value, r is the inflation rate, and t is the time in years. For 4%, 8%, and 19% inflation rates, the present values are $26,812.80, $17,973.16, and $5,982.74, respectively.

Eleni, Who Is Now 55 Years Old, Is Employed by a Firm