Question

In: Finance

A fifteen-year annuity-immediate has monthly payments. The first payment is $300 and the monthly increase is...

A fifteen-year annuity-immediate has monthly payments. The first payment is $300 and the monthly increase is $50. Calculate the accumulated value of the annuity if the annual effective interest rate is 4%. pls show work and formula, thanks!

Solutions

Expert Solution

This question cannot be solved by normal immediate Annuity (Annuity due) formula as the rate of increase of the initial amount is not given. What is given is that the amount increases by $50 every month. We can solve this question using excel. Please refer the below images for the solution.

Hence, the accumulated value of the annuity is $762,395.

For all the formulas used, refer the below image:


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