Posted: June 25th, 2017

Calculate the amount the firm would need on the present date as savings to cover the expected liability.

You are the chief financial officer of a firm. The firm has an expected liability (cash outflow) of $2 million in ten years at a discount rate of 5%.

• Calculate the amount the firm would need on the present date as savings to cover the expected liability.
• Calculate the amount the firm would need to set aside at the end of each year for the next ten years to cover the expected liability.