Future Value of a growing annuity
For purposes of compensation, an actuary working for a lawyer estimates the annual earnings of a September 11 victim that died at the Twin Towers at age 32. The victim was making $95,000 a year and a stream of payments for that amount would have likely accrued to him annually until retirement at age 65. The actuary knows that this is an ordinary annuity problem. He assumes, as is usual, that the victim’s salary would grow in tandem with inflation, which for years has hovered at around at 3% annually. What is the future value of this annuity, the minimum basis for a possible settlement with the relatives of the victim if a fair settlement were indeed on the table?