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Old 11-01-2019, 01:18 PM
swipathefox swipathefox is offline
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Default EA-2F 2017 #19

How do you get the 10-year certain factor from ages 65 to 75 using 4%? Farber's solutions give 8.285578 but I keep calculating 8.43533. What am I missing?
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Old 11-01-2019, 04:09 PM
davefarber davefarber is offline
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Originally Posted by swipathefox View Post
How do you get the 10-year certain factor from ages 65 to 75 using 4%? Farber's solutions give 8.285578 but I keep calculating 8.43533. What am I missing?
You have calculated a 10-year certain factor with annual payments at the beginning of the year. You need the factor when payments are made monthly, at the beginning of each month. First, determine the effective monthly interest rate: [1.04**(1/12)] - 1 = 0.003274, or 0.3274%. Then calculate the annuity due for 120 monthly payments, which works out to 99.4269. Finally, take 1/12 of that amount, since the annual payment is divided into 12 monthly payments. That gives you 8.285578.
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