Present value of an ordinary simple annuity
Francois and pat wish to structure the payments from a 20-year annuity so that the end of quarter paments increase by $500 every five years. Maritime insurance co will pay 5% compounded quarterly on funds recived to purchase such an annuity. How much must francois and pat pay for an annuity in which the quarterly payments increase from $2000 to 2500 to 3000 to 3500 in successive five year periods?
PV = PMT (( 1 - ( 1 + i )^n / i ) +
FV = PV ( 1 + i )
i = 0.05/4
n = 4 ( 5? ) or 20 ? confused on that
PMT = 2000 ? confused on that also