Putting together a life care plan. Says my coworker:
Casey: yeah. I remember using that. That was the first one I using . . .remember? I want to know the monthly amount to yield 1.7 in the future considering a 4% COLA Casey: This calculates the payment 32 years in the future Casey: but I don't have the original monthly amount--I only have the yield, so I don;t have the first year payment amount Tocchster: so the 2330 isn't right? Casey: No it is. but i am not trying to solve for the payment 32 years in the future--I am trying to find out what payment today (year 1) would yield, with a 4% (actaully) COLA in 32 years in the future 1753,133 (or whatever). I have all the variables but the 2330 number. Casey: the 8333 is the amount that would be paid in year 32 Casey: 8333/month
Hmm, so they're looking for the present value to yield that number? Well, they could either re-arrange the equation to read:
p= future amount/(1+i)^n OR if they're trying to take into account continuous compounding in terms of increasing the base number of payment, it's going to need calculus and logarithims.
I work in ze structured settlements industry (if it didn't have its own industry.. now it does). Basically, if you get into some kind of accident--usually vehicle, a lot of worker's comp--and sue, you can either take all the money at once or spread it out over time and eventually take in more because of interest. If you go with the second option, that's a structured settlement. So in this particular case, someone is getting $1.7 million dollars over the course of 32 years with 3% interest tacked onto the monthly rate. Lovely, yes?
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Here, a=future value, p=principle etc. Your n=1, but since you want to know 32 years in the future, i think it's appropriate to use n=32, therefore,
a=2330(1+.03)^32
a=5999.94
Where did the other one come from? It'd have to be compounding monthly, I think.
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Casey: yeah. I remember using that. That was the first one I using . . .remember? I want to know the monthly amount to yield 1.7 in the future considering a 4% COLA
Casey: This calculates the payment 32 years in the future
Casey: but I don't have the original monthly amount--I only have the yield, so I don;t have the first year payment amount
Tocchster: so the 2330 isn't right?
Casey: No it is. but i am not trying to solve for the payment 32 years in the future--I am trying to find out what payment today (year 1) would yield, with a 4% (actaully) COLA in 32 years in the future 1753,133 (or whatever). I have all the variables but the 2330 number.
Casey: the 8333 is the amount that would be paid in year 32
Casey: 8333/month
Confusing? Sure is for me.
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p= future amount/(1+i)^n OR if they're trying to take into account continuous compounding in terms of increasing the base number of payment, it's going to need calculus and logarithims.
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