Compute the present and future value of maria garcia

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Maria Garcia has an (arithmetic) annuity immediate that will make 10 annual payments. The first payment is P = $1000 and payment increases by Q = $100 from the payment before. The effective annual interest rate is i = 2.75%.

a) Compute both the present and future value of Maria Garcia's annuity by showing it is equivalent to the following 2 annuities:

-Annuity A: Level pay, $900 for 10 years

-Annuity B: Arithmetic increasing annuity immediate: starts today, lasts 10 years, first payment P' = $100, increment Q' = $100.

b) Write down formulas for the PV and FV of any similar arithmetic annuity immediate with first payment P, increment Q, n periods, and effective rate per period i.

Reference no: EM132653832

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