SOA Exam FM Sample Question 436
Study guide: Exam FM-2
Elinor is receiving her lottery winnings in the form of a perpetuity so that she will have money to leave to her heirs. You are given the following information:
- i) Payments are annual and began on January 1, 2000.
- ii) Payments increase by 1,000 each year after the first year.
- iii) The present value of her lottery winnings on January 1, 2000 was 1,000,000, immediately before the first payment, based on an annual effective interest rate of 10%.
Calculate the present value of Elinor's lottery winnings on January 1, 2020, immediately after the payment at that time, using an annual effective interest rate of 10%.
- A) 1,008,181
- B) 1,119,091
- C) 1,200,000
- D) 1,210,000
- E) 1,219,999
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