David1961
Thinks s/he gets paid by the post
- Joined
- Jul 26, 2007
- Messages
- 1,085
I know I had a class in college where I studied present value, future value, interest rate, etc for various scenarios. But my memory is fuzzy. I'm interested in computing the present value of a COLA'd pension. Here's the terminology and what I am looking for a formula for.
PV = present value of the pension
n = number of years of collecting pension (I know is not known because this is the number of years you have left to live)
i = inflation rate, also the rate that the pension goes up each year.
A = the pension amount paid during the first year.
I know that the inflation rate would not be constant. And it seems like I may also need another rate (maybe for the return of the portfolio). Not sure.
Am I missing any other variables?
Basically, I'm looking for PV given an assumed n, i, and A. Can anyone point me in the right direction?
PV = present value of the pension
n = number of years of collecting pension (I know is not known because this is the number of years you have left to live)
i = inflation rate, also the rate that the pension goes up each year.
A = the pension amount paid during the first year.
I know that the inflation rate would not be constant. And it seems like I may also need another rate (maybe for the return of the portfolio). Not sure.
Am I missing any other variables?
Basically, I'm looking for PV given an assumed n, i, and A. Can anyone point me in the right direction?