Payment 3,000 at beginning of year, interest 8%, 25 years.How do I compute the annuity due?

Answer 1

3375

An annuity-due is an annuity whose payments are made at the beginning of each period.

Because each annuity payment is allowed to compound for one extra period, the value of an annuity-due is equal to the value of the corresponding ordinary annuity multiplied by (1+r). Thus, the present value of an annuity-due can be calculated through the formula

(A*(1-(1/(r^n)))*(1+r))/r
r = rate of interest
n - number of years
A - amount of annuity

Answer 2

FV = A[((1+r)^N) - 1/r] for ordinary annuity.

Then, treat the initial 3,000 sum as a single lump payment.

FV = PV(1+r)^N

Annuity due implies an immediate payment of $3,000. In a ordinary annuity, the 1st payment is not made until the next yr.

Answer 3

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