An annuity immediate has a first payment of 200 and increases by 100 each year u

Question

An annuity immediate has a first payment of 200 and increases by 100 each year until payments reach 600. Afterwards, there are 5 further payments each at the end of the following years at the constant level of 600. Find the present value at annual effective rate of 5.5%.

Problem 2.8 An annuity immediate has a first payment of 200 and increases by 100 each year until payments reach 600. Afterwards, there are 5 further payments each at the end of the following years at the constant level of 600, Find the present value at annual effective rate of 5.5%.

Explanation / Answer

Sum of values of third column = $3822.11

So, answer is $3822.11

Period Cash flows Present value 0 200 200 1 300 284.36019 2 400 359.380966 3 500 425.806832 4 600 484.330046 5 600 459.080612 6 600 435.1475 7 600 412.462085 8 600 390.959322 9 600 370.577557

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