Annuities and sicking funds
posted by Scott Ingraham on .
Jane forest wants to receive yearly payments of 15000.00 for 10 years. How much must she deposit at her bank today at 11% intrest compouned annually?
I have fugured it to be as follows and could someone tell me if i am right.
15000.00 Future Value
N 10x1=10
I/Y 11% / 1=11
cpt=pmt is this right or am ai fuguring it wrong here Help please

P = N * [1  (1+r)^n]/r
P = 15,000 * [1  (1.11)^10]/.11
P = 88,338
equivalently
P = N * [(1+r)^n 1]/[r*(1+r)^n]
P = 15,000 [ (1.11)^10 1 ] / [.11*(1.11)^10]
P = 15,000 [ 1.84 /.312] = 88,338 
I think you mean sinking funds and not sicking funds, although during these hard times either may be true.

Here is a link to the present value of a future annuity
http://en.wikipedia.org/wiki/Annuity_%28finance_theory%29
Look at
P \,=\,R\left[\frac{1\frac{1}{\left(1+i\right)^n}}{i}\right] = R\cdot a_{\overline{n}i} 
I figured that sicking fund was a typo, but perhaps it was in GE stock.

LOL