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QUESTION

Yianni has funds in his superannuation account. He is considering using these to purchase a pension.

Yianni has funds in his superannuation account. He is considering using these to purchase a pension. In exchange for a lump sum payment now, Polysuper offers an annual pension over thirty-five years beginning with a payment of $51,000 at the end of the first year. There are thirty-five payments in total and the payments will increase at an annual rate of 2.65%pa. The appropriate opportunity cost of funds is j2 = 9.16 %pa what is the amount of the lump sum needed today to purchase this pension?

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