This Formula Calculator calculates the present value of series of payment that increase at a constant rate with the first payment at the beginning of period 0.
PV : The present value.
N : The number of periods.
i% : The periodic rate.
PMT : The base periodic payment at the beginning of period zero. This payment increases by g% each period.
g% : The periodic growth rate of the payment.
"You are considering the purchase of an investment that will pay $1,000 immediately, and then 4 additional payments that grow at a rate of 3% per year to account for expected inflation. If your required return is 8% per year, what is the value of this investment?"
(Graduated Annuities Using Excel - TVMCalcs.com)
|5||N||5.00||Stores the N value.|
|8||i%||8.00||Stores the i% value.|
|1000||PMT||1,000.00||Stores the PMT value.|
|3||g%||3.00||Stores the g% value.|
|PV||-4,557.98||Calculates the present value.|
If you are able to purchase the investment for $4,500, what would your return be?
|-4500||PV||-4,500.00||Stores the PV value.|
|i%||8.73||Calculates the periodic rate.|