Good question. I have had a quick browse and can't find it, so I have attempted it myself, below. I'd be grateful for feedback from others!
Equation 1 DA_N = nV +(n-1)V^2 +(n-2)V^3......+3V^n-2 +2V^n-1 +V^n
Multiply these through by (1+i) to give:
Equation2 (1+i) DA_N = n +(n-1)V +(n-2)V^2......+3V^n-3 +2V^n-2 +V^n-1
Subtract : Equation 2 - Equation 1 gives
i x DA_N = n -V -V^2........-V^n-2 -V^n-1 -V^n
or
i x DA_N = n -(v + v^2.....+v^n-2 +v^n-1 +v^n)
Since the formula in the brackets is the formula for a level annuity in arrears:
i x DA_N = n-a_n
And so DA_N = (n-a_n)/i
Last edited by a moderator: Aug 14, 2012