Pension fund managers must compute commuted value in order to determine their payout obligations and reserve requirements. The process for this calculation is similar to computing net present value of a capital budgeting project. The higher the interest rate, the lower the amount required, and vice-versa. The further into the future the money will be required, the lower the commuted value, and vice-versa.
Investment dictionary. Academic. 2012.
Look at other dictionaries:
commuted value — The present value of a future interest in property used in taxation and in evaluating damages. Present value of future payments when discounted … Black's law dictionary
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