Question

Find the present value of an annuity immediate such that payments start at 10 and increase by annual amounts of 10 to a payment of 100. Then payments decrease by 20 to a final payment of 40. Assume an effective rate of interest of 4%

Answer 1

Year Cash flow PVIF@4% Present value 0 $ 10 1.000 $ 10.00 1 $ 20 0.962 $ 19.23 2 $ 30 0.925 $ 27.74 3 $ 40 0.889 $ 35.56 41 $ 50 0.855 $ 42.74 5 $ 60 0.822 $ 49.32 6 $ 70 0.790 $ 55.32 7 $ 80 0.760 $ 60.79 8 $ 90 0.731 $ 65.76 9 $ 100 0.703 $ 70.26 101 $ 80 0.676 $ 54.05 11 $ 60 0.650 $ 38.97 12 $ 40 0.625 $ 24.98 Present value $ 554.72

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