Let us first understand the cashflows structure and increment
let us calculate FV i.e. future value of $2 for 4 years
We know that r = 2% per annum
FV for annuity due =(1+r)* ((1+r)^4-1)/r = 4.204
Now FV1=FV2=FV3=FV4=.........FV10=4.204
now since aur FVs are standing at 4 year's distance then our interest rate should also have for year compounding frequency that rate is R(4) = (1+r)^4 -1 = 1.02^4 -1= 8.243%
Know since our FVs are growing at the rate of 10.25 % per 4 year then we need to calculate a co- growth interest rate = which is given by
R* = ((1+g)*(1+R(4))) -1 = (1.1025 *1.08243 ) -1 = 19.34%
Now our final Future value is
= ((1+R*)^10 -1)/R* × (1/(1 +g) = (1.1934^10 -1)/.1934 ×(1/(1.1025) =95.81 $
The closest option is d 93$
06: An annuity due pays an initial benefit of 1 per year, with the benefit increasing...
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