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in BUS 2016H - Financial Mathematics by (400 points)

Two annuities will each be payable monthly in arrear for 10 years. Under annuity \(A\) the monthly payments made in year \(t\) will be \(11−t\), while under annuity \(B\) the monthly payments will be \(1.05t\) . At an effective rate of \(i\) per annum the present value of annuity \(A\) is 5 times that of \(B\). Find \(i\) to the nearest 12%

I can find an annuity formula for annuity \(B\), but I'm struggling to get one for annuity \(A\)?

by (4.2k points)

Hi @michwairish. I've edited your post and added the actual question (this is always better than asking people to look it up in external sources). \(A\) is a type of annuity known as a 'decreasing annuity'; if you want to read ahead, the formulas usually look something like \((Da)_{\bar{n|}}\).

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