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Math Help - Present value of an ordinary simple annuity

  1. #1
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    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
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  2. #2
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    Question simply worded:
    $x is deposited in an account paying 5% compounded quarterly,
    such that these 80 quarterly payments will be possible:
    2000 for 1st 5 years
    2500 for next 5 years
    3000 for next 5 years
    3500 for last 5 years.

    Let = 1 - 1 / 1.0125^20
    a = 2000f
    b = 2500f / 1.0125^20
    c = 3000f / 1.0125^40
    d = 3500f / 1.0125^60

    x = a + b + c + d ; ~130872.88

    Couple questions for you:
    where are these problems coming from?
    are you attending classes for these?
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