1. Find Regular Deposit
(PMT Amount) C = ?
Interest Rate i = 10%, Time n = 5 Year, Present value PV = 4169.87,
Deposit Frequency = at the beginning (Annuity Due) of every Year (1/year)
for Present value of Annuity Due method
Solution:
`i=10%=0.1` per year (Interest rate)
`n=5` years (Number of periods)
`PV=4169.87` (Present value)
Now, Present value (Annuity Due) formula is
`PV_("Annuity Due")=C*[(1-(1+i)^(-n))/(i)]*(1+i)`
`:.4169.87=C*[(1-(1+0.1)^-5)/(0.1)]*(1+0.1)`
`:.4169.87=C*[(1-(1.1)^-5)/(0.1)]*1.1`
`:.4169.87=C*[(1-0.6209)/(0.1)]*1.1`
`:.4169.87=C*[3.79]*1.1`
`:.C=4169.87/(3.79*1.1)`
`:.C=1000`
2. Find Regular Deposit
(PMT Amount) C = ?
Interest Rate i = 10%, Time n = 3 Year, Present value PV = 13677.69,
Deposit Frequency = at the beginning (Annuity Due) of every Year (1/year)
for Present value of Annuity Due method
Solution:
`i=10%=0.1` per year (Interest rate)
`n=3` years (Number of periods)
`PV=13677.69` (Present value)
Now, Present value (Annuity Due) formula is
`PV_("Annuity Due")=C*[(1-(1+i)^(-n))/(i)]*(1+i)`
`:.13677.69=C*[(1-(1+0.1)^-3)/(0.1)]*(1+0.1)`
`:.13677.69=C*[(1-(1.1)^-3)/(0.1)]*1.1`
`:.13677.69=C*[(1-0.7513)/(0.1)]*1.1`
`:.13677.69=C*[2.49]*1.1`
`:.C=13677.69/(2.49*1.1)`
`:.C=5000`
This material is intended as a summary. Use your textbook for detail explanation.
Any bug, improvement, feedback then
