Calculating Present Value of a Growing Annuity with Monthly Payments

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SUMMARY

The discussion centers on calculating the present value of a growing annuity with monthly payments, specifically a 20-year annuity starting with $100 monthly payments that increase by $10 each year. The effective annual interest rate is set at 4%. Participants emphasize the importance of understanding the specific formula for present value in annuities and encourage showing prior attempts to solve the problem before seeking help.

PREREQUISITES
  • Understanding of present value formulas
  • Knowledge of annuity types, specifically growing annuities
  • Familiarity with effective interest rates and their calculations
  • Basic algebra skills for manipulating financial equations
NEXT STEPS
  • Research the formula for present value of a growing annuity
  • Learn about effective interest rate calculations and their implications
  • Explore financial calculators or software that can compute present values
  • Study examples of annuity problems to reinforce understanding
USEFUL FOR

Finance students, financial analysts, and anyone involved in investment planning or annuity calculations will benefit from this discussion.

micaehl1985
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1. 5. A twenty year annuity has end of month payments. The first year the payments are each $100. In subsequent years each payment increases by $10 over what it was the previous year. Find the present value of the annuity if i = 4% is the effective annual interest rate.

Thank you
 
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We are not here to do your homework for you. You must show some effort first.
 
I am not sure how to do this question. I tried to solve it.
 
I am not sure how to do this question. I tried to solve it.
 
Uh, okay? And how is repeating that in any way useful. Pengwuino didn't expect you to provide an entire solution, because you wouldn't be here in the first place if you had one. Showing effort means show us what you've tried.

This shouldn't be that hard. The present value of any type of quantity has a very specific formula.
 

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