N
n111kus
Member
Question reads:
Calculate the pv, at i=3% pa effective, of an annuity where 10 is paid at the end of the first year, 12 is paid at the end of the second year, 14 at the end of third and so on, with payments increasing by 2 pa until the payment series ends at time 20.
Solution:
PV=8 X An + 2 X IAn, where n = 20.
I used the same formula but n = 19, I did this because the payment is made at the end of the period, so if the payments end at t=20, the payment at end of year 20 would not be made.
Is it an ambiguous question and if so would I get full marks for using correct formula...Or am I reading it wrong?
Thanks for any help
Nik
Calculate the pv, at i=3% pa effective, of an annuity where 10 is paid at the end of the first year, 12 is paid at the end of the second year, 14 at the end of third and so on, with payments increasing by 2 pa until the payment series ends at time 20.
Solution:
PV=8 X An + 2 X IAn, where n = 20.
I used the same formula but n = 19, I did this because the payment is made at the end of the period, so if the payments end at t=20, the payment at end of year 20 would not be made.
Is it an ambiguous question and if so would I get full marks for using correct formula...Or am I reading it wrong?
Thanks for any help
Nik