Question

A rich aunt has promised you $ 4000 one year from today. In​ addition, each year after​ that, she has promised you a payment​ (on the anniversary of the last​ payment) that is 4 % larger than the last payment. She will continue to show this generosity for 20myears, giving a total of 20 payments. If the interest rate is 4 % ​, what is her promise worth​ today?

Answer 1

Year	Amount	Factor	Present value
1	4,000.00	0.961538	3,846.15
2	4,160.00	0.924556	3,846.15
3	4,326.40	0.888996	3,846.15
4	4,499.46	0.854804	3,846.15
5	4,679.43	0.821927	3,846.15
6	4,866.61	0.790315	3,846.15
7	5,061.28	0.759918	3,846.15
8	5,263.73	0.73069	3,846.15
9	5,474.28	0.702587	3,846.15
10	5,693.25	0.675564	3,846.15
11	5,920.98	0.649581	3,846.15
12	6,157.82	0.624597	3,846.15
13	6,404.13	0.600574	3,846.15
14	6,660.29	0.577475	3,846.15
15	6,926.71	0.555265	3,846.15
16	7,203.77	0.533908	3,846.15
17	7,491.92	0.513373	3,846.15
18	7,791.60	0.493628	3,846.15
19	8,103.27	0.474642	3,846.15
20	8,427.40	0.456387	3,846.15
Total			76,923.08

Worth of promise today is $76,923.08