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**DCU** An investor is to receive a series of annual payments for a term of 15 years in which payments are

increased by 2.5% compound each year to allow for inflation. The first payment is to be €14,400 on 1 January 2011. Find the accumulated value of the annuity payments as at 1 January 2031 if the investor achieves an effective rate of return 3.5% per annum effective.

A bit hard to follow: 2011 to 2031 is not 15 years...

anyway, I'll assume 15 years, 1st deposit end of 1st year:

n = 15

p = 14400

x = 1 + .025

y = 1 + .035

F = p(y^n - x^n) / (y - x) = 14400(1.035^15 - 1.025^15) / (1.035 - 1.025) = 326952.9565...

Account will look like:

Code:

YEAR PAYMENT INTEREST BALANCE
0 .00
1 14400.00 .00 14400.00
2 14760.00 504.00 29664.00
3 15129.00 1038.24 45831.24
....
15 20346.82 10368.32 326952.96