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Apollo Inc. has an unfunded pension liability of $900 million that must be paid in 30...

Apollo Inc. has an unfunded pension liability of $900 million that must be paid in 30 years. If the annual interest rate is 6% compounded semiannually, what is the present value?

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Answer #1

We have the formula:

Present value = Future value*((1+rate)^-n)

Here:

n is the number of periods.

Present value = ?

Future value=900 million

rate=6%/2=3% (Compounded semiannually)

n=30*2=60 (Compounded semiannually)

Substituting values:

Present Value=900 million/(1.03^60)

152.759781015 millions

or $152,759,781.02

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