Calculating FV and PV of an annuity!
Discussion
A bit off topic, but thought someone may be able to help!
trying to work out this question, should be pretty simple but I seem to have messed it up
basically i need to work out whether its worth investing in a pension scheme.
Invest £2000 pa @ 8% for 10 years, and then £3000pa @8% for 20 years.
After year 30, you start receiving £4500pa @ 10% for 20 years.
Paying out: FV of the first(£2k) is £28973.12 and FV2(£3k) = £137285
Im a bit confused trying to work out the value of what you'r receiving back.
So you pay out money for 30 years, then start reciving the pension or whatever for the next 20.
Do i need to work out the Present Value of what i'm reciving as opposed to FV.
The PV i worked out was about 38k, which doesn't seem right seeing as we're paying out £160k+
When i work out the FV its £257k but it doesn't seem right that i work out the future value.
If anyone could give me a hand that would be great! Don't worry it's not homework, just annoying me that i can't do it
Cheers!
trying to work out this question, should be pretty simple but I seem to have messed it up
basically i need to work out whether its worth investing in a pension scheme.
Invest £2000 pa @ 8% for 10 years, and then £3000pa @8% for 20 years.
After year 30, you start receiving £4500pa @ 10% for 20 years.
Paying out: FV of the first(£2k) is £28973.12 and FV2(£3k) = £137285
Im a bit confused trying to work out the value of what you'r receiving back.
So you pay out money for 30 years, then start reciving the pension or whatever for the next 20.
Do i need to work out the Present Value of what i'm reciving as opposed to FV.
The PV i worked out was about 38k, which doesn't seem right seeing as we're paying out £160k+
When i work out the FV its £257k but it doesn't seem right that i work out the future value.
If anyone could give me a hand that would be great! Don't worry it's not homework, just annoying me that i can't do it
Cheers!
owain said:
A bit off topic, but thought someone may be able to help!
trying to work out this question, should be pretty simple but I seem to have messed it up
basically i need to work out whether its worth investing in a pension scheme.
Invest £2000 pa @ 8% for 10 years, and then £3000pa @8% for 20 years.
After year 30, you start receiving £4500pa @ 10% for 20 years.
Paying out: FV of the first(£2k) is £28973.12 and FV2(£3k) = £137285
Im a bit confused trying to work out the value of what you'r receiving back.
So you pay out money for 30 years, then start reciving the pension or whatever for the next 20.
Do i need to work out the Present Value of what i'm reciving as opposed to FV.
The PV i worked out was about 38k, which doesn't seem right seeing as we're paying out £160k+
When i work out the FV its £257k but it doesn't seem right that i work out the future value.
If anyone could give me a hand that would be great! Don't worry it's not homework, just annoying me that i can't do it
Cheers!
Occupation: Student trying to work out this question, should be pretty simple but I seem to have messed it up
basically i need to work out whether its worth investing in a pension scheme.
Invest £2000 pa @ 8% for 10 years, and then £3000pa @8% for 20 years.
After year 30, you start receiving £4500pa @ 10% for 20 years.
Paying out: FV of the first(£2k) is £28973.12 and FV2(£3k) = £137285
Im a bit confused trying to work out the value of what you'r receiving back.
So you pay out money for 30 years, then start reciving the pension or whatever for the next 20.
Do i need to work out the Present Value of what i'm reciving as opposed to FV.
The PV i worked out was about 38k, which doesn't seem right seeing as we're paying out £160k+
When i work out the FV its £257k but it doesn't seem right that i work out the future value.
If anyone could give me a hand that would be great! Don't worry it's not homework, just annoying me that i can't do it
Cheers!
....
sm0273 said:
owain said:
A bit off topic, but thought someone may be able to help!
trying to work out this question, should be pretty simple but I seem to have messed it up
basically i need to work out whether its worth investing in a pension scheme.
Invest £2000 pa @ 8% for 10 years, and then £3000pa @8% for 20 years.
After year 30, you start receiving £4500pa @ 10% for 20 years.
Paying out: FV of the first(£2k) is £28973.12 and FV2(£3k) = £137285
Im a bit confused trying to work out the value of what you'r receiving back.
So you pay out money for 30 years, then start reciving the pension or whatever for the next 20.
Do i need to work out the Present Value of what i'm reciving as opposed to FV.
The PV i worked out was about 38k, which doesn't seem right seeing as we're paying out £160k+
When i work out the FV its £257k but it doesn't seem right that i work out the future value.
If anyone could give me a hand that would be great! Don't worry it's not homework, just annoying me that i can't do it
Cheers!
Occupation: Student trying to work out this question, should be pretty simple but I seem to have messed it up
basically i need to work out whether its worth investing in a pension scheme.
Invest £2000 pa @ 8% for 10 years, and then £3000pa @8% for 20 years.
After year 30, you start receiving £4500pa @ 10% for 20 years.
Paying out: FV of the first(£2k) is £28973.12 and FV2(£3k) = £137285
Im a bit confused trying to work out the value of what you'r receiving back.
So you pay out money for 30 years, then start reciving the pension or whatever for the next 20.
Do i need to work out the Present Value of what i'm reciving as opposed to FV.
The PV i worked out was about 38k, which doesn't seem right seeing as we're paying out £160k+
When i work out the FV its £257k but it doesn't seem right that i work out the future value.
If anyone could give me a hand that would be great! Don't worry it's not homework, just annoying me that i can't do it
Cheers!
....
Just trying to answer a question from my notes, didn't want people to think they were doing my work for me. Just trying to understand one of the topics
cheers though
Owain, at this time of night you're going to encounter:
(a)bitter, single men in their pants flicking between Pistonheads and pornography
(b)bitter men who have had an argument with their other half who are just easing open their flies before logging on to pornography.
Try bumping this in the morning when people are largely more bright eyed and bushy tailed.
[bitterly rips open box of tissues]
(a)bitter, single men in their pants flicking between Pistonheads and pornography
(b)bitter men who have had an argument with their other half who are just easing open their flies before logging on to pornography.
Try bumping this in the morning when people are largely more bright eyed and bushy tailed.
[bitterly rips open box of tissues]
Edited by captainzep on Thursday 27th November 22:25
captainzep said:
Owain, at this time of night your going to encounter:
(a)bitter, single men in their pants flicking between Pistonheads and pornography
(b)bitter men who have had an argument with their other half who are just easing open their flies before logging on to pornography.
Try bumping this in the morning when people are largely more bright eyed and bushy tailed.
[bitterly rips open box of tissues]
yeah i was wondering who would be on at this time!(a)bitter, single men in their pants flicking between Pistonheads and pornography
(b)bitter men who have had an argument with their other half who are just easing open their flies before logging on to pornography.
Try bumping this in the morning when people are largely more bright eyed and bushy tailed.
[bitterly rips open box of tissues]
Thought there may be somebody who knew lol, I'll be able to find out tomorrow probably anyway. It was just annoying me so I thought I'd see if somebody knew!
http://www.investopedia.com/articles/03/101503.asp
There's a website called "Google". It's amazing. Try it.
Pension schemes work like this:
1) You pay lots of money in during the course of your lifetime.
2) The salesman takes the first year's payments in commission
3) All the clever people in the middle take the profits
4) The fund nosedives
5) A company you've never heard of sends you a glossy brochure with some graphs in it
6) Your IFA tells you it's a long term investment, so it's OK really
7) HM Government taxes the remainder to zero.
Yep, that's about it
1) You pay lots of money in during the course of your lifetime.
2) The salesman takes the first year's payments in commission
3) All the clever people in the middle take the profits
4) The fund nosedives
5) A company you've never heard of sends you a glossy brochure with some graphs in it
6) Your IFA tells you it's a long term investment, so it's OK really
7) HM Government taxes the remainder to zero.
Yep, that's about it
loafer123 said:
http://www.investopedia.com/articles/03/101503.asp
There's a website called "Google". It's amazing. Try it.
yeah already have that site up, and plenty other's ive looked atThere's a website called "Google". It's amazing. Try it.
I know how to calulate them, and I have the formulas but i can't work out this certain example.
Not sure how i work out how i value the pension payments and whether it's worth taking out the pension!
Simpo Two said:
Pension schemes work like this:
1) You pay lots of money in during the course of your lifetime.
2) The salesman takes the first year's payments in commission
3) All the clever people in the middle take the profits
4) The fund nosedives
5) A company you've never heard of sends you a glossy brochure with some graphs in it
6) Your IFA tells you it's a long term investment, so it's OK really
7) HM Government taxes the remainder to zero.
Yep, that's about it
Lol, yeah that sounds about right.1) You pay lots of money in during the course of your lifetime.
2) The salesman takes the first year's payments in commission
3) All the clever people in the middle take the profits
4) The fund nosedives
5) A company you've never heard of sends you a glossy brochure with some graphs in it
6) Your IFA tells you it's a long term investment, so it's OK really
7) HM Government taxes the remainder to zero.
Yep, that's about it
Luckily this is only an example! Without actually doing the calculations, surely the only way to make a comparison is to compare the present value of the outgoing payments with the present value of those received?
Basically you've got to do an NPV analysis. If its positive (the PV of the withdrawals is greater than the payments) its worthwile.
Basically you've got to do an NPV analysis. If its positive (the PV of the withdrawals is greater than the payments) its worthwile.
loafer123 said:
I think you want to calculate whether the FV of the investment (£2k, £3k payments) is worth more than the PV of the receipts.
But I may be not understanding the question properly.
yeah sorry didn't explain it that well. That's what i'm thinking. But I may be not understanding the question properly.
But the FV of both investments is £166,258.12
and when I calculated the PV of the receipts it was circa £38k
Unless it's just a stupid question, so the answer would be you wouldn't take up the pension scheme as you'r paying a hell of a lot more than you get back.
Actuallt, judging by the lecturer that gave us the notes it wouldn't surprise me if the questions don't make sense
Originall i calculated FV of what you pay over 30 years, and then the FV of what you get in return for the following 20 years ( the answer made sense ) but that's not really what the questions asking i don't think
I may just put it down to being a stupid example
Owain.
S'mai? by the way.
Get a job in the public sector and sign up to the superannuation scheme. Then someone else worries about the sums, -and come retirement (and tax-free lump sum time) all you have to worry about is finding wallet and navigating your way around this...
http://www.porsche.com/uk/
S'mai? by the way.
Get a job in the public sector and sign up to the superannuation scheme. Then someone else worries about the sums, -and come retirement (and tax-free lump sum time) all you have to worry about is finding wallet and navigating your way around this...
http://www.porsche.com/uk/
captainzep said:
Owain.
S'mai? by the way.
Get a job in the public sector and sign up to the superannuation scheme. Then someone else worries about the sums, -and come retirement (and tax-free lump sum time) all you have to worry about is finding wallet and navigating your way around this...
http://www.porsche.com/uk/
Iawn Diolch!S'mai? by the way.
Get a job in the public sector and sign up to the superannuation scheme. Then someone else worries about the sums, -and come retirement (and tax-free lump sum time) all you have to worry about is finding wallet and navigating your way around this...
http://www.porsche.com/uk/
Yeah we'll see, I can't imagine it's the best time to be looking for finance jobs in the next couple of years so maybe public sector is the way to go!
owain said:
captainzep said:
Owain.
S'mai? by the way.
Get a job in the public sector and sign up to the superannuation scheme. Then someone else worries about the sums, -and come retirement (and tax-free lump sum time) all you have to worry about is finding wallet and navigating your way around this...
http://www.porsche.com/uk/
Iawn Diolch!S'mai? by the way.
Get a job in the public sector and sign up to the superannuation scheme. Then someone else worries about the sums, -and come retirement (and tax-free lump sum time) all you have to worry about is finding wallet and navigating your way around this...
http://www.porsche.com/uk/
Yeah we'll see, I can't imagine it's the best time to be looking for finance jobs in the next couple of years so maybe public sector is the way to go!
Unless you're a Cardiganshire local?
_James said:
Without actually doing the calculations, surely the only way to make a comparison is to compare the present value of the outgoing payments with the present value of those received?
Basically you've got to do an NPV analysis. If its positive (the PV of the withdrawals is greater than the payments) its worthwile.
^^Do thatBasically you've got to do an NPV analysis. If its positive (the PV of the withdrawals is greater than the payments) its worthwile.
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