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Mr Sam gets annual pension payments for the next 30 years. After the first payment, each subsequent annual benefit will be adjusted upwards to reflect

Mr Sam gets annual pension payments for the next 30 years. After the first payment, each subsequent annual benefit will be adjusted upwards to reflect impact of inflation.

You are given:

(i) The first benefit is 30,000 and will be paid one year from today.

(ii) The inflation rate is 3.7% per year forever.

At an annual effective interest rate of 7.2%, what is the current value of the pension?

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