The Present Value of a General Annuity Combination Problem #2
This video shows an example of an application problem in which we need to compute the present value of a deferred ordinary general annuity.
In this case, I show the solution of the present value of the deferment period in two ways: first, using the usual rate of interest in the problem, and second, using the equivalent periodic rate of interest computed in the period with payments. The problem solved is the following:
Planning for their daughter’s college education, the Woods opened an account paying 6.3% compounded quarterly. If ordinary annuity payments of $200 at the end of each month are to be paid out of the account for three years starting seven years from now, how much did the Woods deposit?