Question

can you please exaplin the underlined step. i dont understand why we have to multiply by s twice

surance company has an obligation to pay medical bills for a claimant. Average annual claims today are $5,000, and medical inflation is expected to be 7% per year. The claimant is expected to an additional 20 years. Claim payments are made at yearly intervals, with the first claim payment to due one year from today. Find the present value of the obligation if the annual interest rate is 5%. (A) 87,932 (B) 102,514 (C) 114,611 (D) 122,634 (E) Cannot be determined Assuming the claimant survives exactly the expected 20 years, his payments will be 5000(1.07), 5000(1.07) ..., 5000(1.07)" The PV of these payments at 5% is ho 1.07 1.07. 1.072) - 5000-1.07 41.07 +A(1.07% "1.05 * 1.052 *-*1.052 1.05 *1.05*** (1.05 5000 (1.07 20 7 5000-1.07 1.05 5000-1.07 1.458445000-1.07-0.458443 2 = 122,634 - 1.65 0.02 7 0.02 1.05 Alternatively: 1.07 = 1.01905. 5000-1.07 1.07 - 1.05 1.05 20101905 = 5,095.238.520.01905 = 122,6348001905 = 122,634 Answer: D ال)

Answer 1

There is no twice multiplication..There is a typo in the solution
5095.238*s20|0.01905
=5095.238*24.06884667
=122634