A 20-year growing annuity made its first payment in the amount of
$1,000 to the investor on Jan 1, 2022, and then the payment grew 3%
annually. On Jan 1, 2022, right after the $1,000 was paid, how much was
this growing annuity worth? Use discount rate r = 8%.
Tip:
• In the PV formula of growing annuity, C is the payment one year from the
time of evaluation. So, you need to first find out what the payment is in
one year from Jan 1, 2022.
• t in the formula is the number of payments left to be paid in the future.
Think carefully about it.
• Lastly, distinguish between r and g in the formula.
$12,230
$12,618
$11,618
$13,230