Math finance question on Varying Annuities with Payments at a Different Frequency than Interest is Convertible
On his 65th birthday, Smith would like to purchase a tenyear annuityimmediate
that pays 6000 per month for the first year, 5500 per month for the second
year, 5000 per month for the third year, and so on. Using an annual effective
interest rate of 5%, how much will Smith pay for such an annuity?
This is a good resource https://archive.org/details/theoryofinterest00kell/page/1/mode/1up?view=theater
Markgvanzalk
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You are given:
(i) X is the current value at time 2 of a 20year annuitydue of $1 per annum.
(ii) The annual effective interest rate for year t is (1/(8+t)).
Find X.