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#1
01-19-2010, 05:43 PM
 kklatka Join Date: Jul 2008 Posts: 11
Increasing Annuity Confusion

I find Im still not quite grasping Increasing Annuity in the sense that I can not differentiate between when the annuity within the formula is Immediate or Due! I know the difference b/w immediate and due annuities, and immediate and due Increasing annuities ( *(1+i) for due) but what about just WITHIN the increasing/decreasing annuities? when do you use one over the other? Examples would help!! THANKS
#2
01-19-2010, 06:14 PM
 Actuarialsuck Member Join Date: Sep 2007 Posts: 5,326

I am not sure what you are asking...
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#3
01-19-2010, 07:39 PM
 kklatka Join Date: Jul 2008 Posts: 11

When calculating (Ia)-n| the formula is (a-n| - nv^n)/i .... but sometimes its a-n| (..) {i mean annuitt DUE instead of IMMEDIATE)
and through all the exams keys/examples it seems to go back and forth between the 2, and I can't figure out when to use which--
Even if the Increasing Annuity itself is immediate, sometimes the formula uses annuity-due
That make more sense i hope?
#4
01-19-2010, 08:01 PM
 optimizer Member Join Date: Mar 2009 Studying for VEE & FAP Posts: 352

Quote:
 Originally Posted by kklatka When calculating (Ia)-n| the formula is (a-n| - nv^n)/i .... but sometimes its a-n| (..) {i mean annuitt DUE instead of IMMEDIATE) and through all the exams keys/examples it seems to go back and forth between the 2, and I can't figure out when to use which-- Even if the Increasing Annuity itself is immediate, sometimes the formula uses annuity-due That make more sense i hope?
It is still difficult (for me, at least) to figure out exactly what your question is.

Are you comparing the standard formulas for $(Ia)_{\overline{n}|}$ and $(I_{P,Q}a)_{\overline{n}|}$ ?
If not, you are going to have to explain in more detail what your second formula is. You are correct that although $(Ia)_{\overline{n}|}$ is an increasing annuity immediate, its formula involves an annuity due. The present value of an increasing annuity due ,$(I\ddot{a})_{\overline{n}|}$, has the same numerator, but a denominator of d rather than i. (To see why this is true, think about what you need to multiply $(Ia)_{\overline{n}|}$ by to obtain $(I\ddot{a})_{\overline{n}|}$.)

BTW, see this thread for some pointers on how to typeset actuarial notation--and mathematics in general--in a way that is easy for us to read.
#5
01-20-2010, 10:47 AM
 Piranha Member Join Date: May 2009 Favorite beer: Cabernet Posts: 797

Quote:
 Originally Posted by kklatka When calculating (Ia)-n| the formula is (a-n| - nv^n)/i .... but sometimes its a-n| (..) {i mean annuitt DUE instead of IMMEDIATE) and through all the exams keys/examples it seems to go back and forth between the 2, and I can't figure out when to use which-- Even if the Increasing Annuity itself is immediate, sometimes the formula uses annuity-due That make more sense i hope?
When you say "it seems to go back and forth between the 2", can you provide a couple of examples of what you're talking about?
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#6
01-20-2010, 11:43 AM
 panther Member Join Date: Feb 2009 Posts: 2,174

I think he/she is just confused on what point in time the solution used to solve the problem. Note that you can solve annuity problems on just about any date, but obviously it is easier to solve at time 0 in some cases, time 1 in others, etc.

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