Q&A Bank Part 1

[Aisha]

question 1.10
Based on my understanding of the question, I could proceed with the following steps:

PV= 100 + 100*(1.05v)+ 100*(1.05v)^2+.........+ 100*(1.05v)^9
= 100(1+(1.05v)+(1.05v)^2+......+(1.05v)^9)
=100 a_doubledot_dash_10
Finding out the value of aa_doubledot_dash_10 using i' = 4.762% pa, we get a_doubledot_dash_10 = 8.1836

But the solution given is 100*a_bar_1(@10%)*a_doubledot_dash_10(@4.762%)

Why do we consider two annuities?

 

[Muppet]

Because the payments are made continuously in each year. Your formula implicitly implies that payments are made at the start of each year.