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in BUS 2016H - Financial Mathematics by (130 points)

Tut 7 2019

Question 3

An annuity-certain was purchased on 1 November 1895 to provide 15 instalments, payable on 1 September 1986 and thereafter on 1 January, 1 May and 1 September until 1 may 1991 inclusive. The amount of the first instalment was R1000 and each subsequent instalment is 5% greater than its predecessor. 

(a) Calculate the purchase price of the annuity-certain on the basis of an effective interest rate of 6% per annum.


This is what ive tried to do.

Thanks


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1 Answer

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by (140 points)

Start by present valuing it to September 1st and then present value it to November

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