Congressional Serial Set Volume 5914 (Paperback)

This historic book may have numerous typos and missing text. Purchasers can download a free scanned copy of the original book (without typos) from the publisher. Not indexed. Not illustrated. 1911 Excerpt: ...various ages, the first step is to select a mortality table that most accurately represents the particular body of lives on which the annuities are to be granted. The table recommended, for reasons given on page 95, is the British Offices' Select Annuitants' Table. The next step is to decide upon a rate of interest which the funds received in payment for the annuity contracts may reasonably be expected to earn. The rate of interest proposed, for reasons given on page 104, is per cent. With these two fundamentals established, Table XIV has been prepared, which shows the present value of a life annuity of $1 for a male at age 70, first payment in one year to be $7.2205. Briefly stated, the price of an annuity is the present worth of a series of payments to be made to a person for a stated period or until the happening of some event, such as death. Table XIV.--Showing how the value of an annuity is determined. PRESENT VALUE OF AN ANNUITY OF $1 FOR A MALE, BEGINNING AT AGE 70. It will be observed that, according to the above table (Table XIV), the number living at the beginning of age 70 is 38,991. At the beginning of the second year there will be, according to the same table, only 37,573 living, and consequently as the first annuity payment under our calculation is to be made at the beginning of the second year the payment will amount to only $37,573. If an adjustment were made at the beginning of the first year, the Government would have to pay such a sum as would with compound interest amount to $37,573 at the end of the year. Since each one of the annuitants has an equal claim upon this sum, it must be divided by 38,991, the number living at the beginning of the first year. The share of each annuitant, 3 per cent interest being assumed, is therefore t...