Question

Jasper is bequeathed a thirty year deferred annuity that has a payment at the the end of each third year. The first payment is for $15000 and is made five years after she receives inheritance. There is always an increase of $ 4000 from one payment to the next. Find the value of her legacy at the time of the bequest, assuming that annual effective interest rate remains level at 5%. The answer is 125325.91, please use financial math to calculate it, with steps, not excel.

Answer 1

Computation of Value of Jasper Legacy

Value of Jasper Legacy = P1 * PVF (5%, 5 years) + P2 * PVF (5%, 8 years) + P3 * PVF (5%, 11 years) + P4 * PVF (5%, 14 years) + P5 * PVF (5%, 17 years) + P6 * PVF (5%, 20 years) + P7 * PVF (5%, 23 years) + P8 * PVF (5%, 26 years) + P9 * PVF (5%, 29 years) + P10 * PVF (5%, 32 years)

Where P = Payment Number; PVF Present Value Factor

Value of Jasper Legacy = $15000 * 0.7835 + $19000 * 0.6768 + $23000 * 0.5847 + $27000 * 0.5051 + $31000 * 0.4363 + $35000 * 0.3769 + $39000 * 0.3256 + $43000 * 0.2812 + $47000 * 0.2429 + $51000 * 0.2099

Value of Jasper Legacy = $11725.89 + $12859.95 + $13447.62 + $13636.83 + $13525.20 + $13191.13 + $12697.28 + $12093.35 + $11418.48 + $10703.17

Value of Jasper Legacy = $125325.91