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Old 11-04-2018, 12:18 AM
Sullinator Sullinator is offline
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Default Increasing annuities

Smith makes deposits to a savings account on July 2 of each year. The first deposit was made on July 1, 1972, and the last deposit will be made on July 1, 1982. The first deposit was 1,000 and each subsequent deposit increases by 100. The account is credited with an effective annual rate of interest of 4%. Determine the value of Smithís account as of July 2, 1982.

Iím doing 100(Is)angle11 formula, why doesnít this work?
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Old 11-04-2018, 12:27 AM
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The first deposit wasn't 100.
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Old 11-04-2018, 12:29 AM
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The first deposit wasn't 100.
Sorry, I meant 100s angle11. Why canít I do that? How do I use the increasing annuity-immediate accumulated value?
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Old 11-04-2018, 12:38 AM
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Here's some advice. Just learn the P,Q formulas. You don't need the specific formulas for increasing and decreasing annuities. I would just learn the present value formula for the P,Q annuity and then do an interest adjustment for a future value.
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Old 11-04-2018, 12:44 AM
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Here's some advice. Just learn the P,Q formulas. You don't need the specific formulas for increasing and decreasing annuities. I would just learn the present value formula for the P,Q annuity and then do an interest adjustment for a future value.
What do you mean by P and Q formulas? Do you mean learn formulas for increasing annuity-immediate present value and increasing annuity-due present value? Just learn those?
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Old 11-04-2018, 12:50 AM
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There is a general formula that applies to all annuities where the payments are an arithmetic sequence. P is the amount of the first payment and Q is the difference in successive payments. With your problem P is 1000 and Q is 100. I would just learn the formula for present value of an annuity immediate, and do an interest adjustment. You want to minimize the number of formulas that you have to memorize.
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Old 11-04-2018, 12:55 AM
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Quote:
Originally Posted by Academic Actuary View Post
There is a general formula that applies to all annuities where the payments are an arithmetic sequence. P is the amount of the first payment and Q is the difference in successive payments. With your problem P is 1000 and Q is 100. I would just learn the formula for present value of an annuity immediate, and do an interest adjustment. You want to minimize the number of formulas that you have to memorize.
That makes sense, but then why does theinfinteactuary give all these other formulas as well? Why not just give one formula like you said? Or just the formulas increasing annuity-immediate present value and increasing annuity-due present value? Not trying to complain, just wondering.
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