Engineering Board Exam Reviewer · Uniform Gradient Series · easy
Year-end payments are P0 in year 1 and then increase by P1,000 each year (0, 1,000, 2,000, 3,000, 4,000 for years 1 to 5). Find the present worth at 10% interest.
- P6,861.80
- P3,790.79
- P1,810.13
- P9,684.17
Answer
A. P6,861.80
Solution
Use the gradient factor (P/G,i,n)= 1i≤ft[(1+i)n-1/i(1+i)n-n/(1+i)n ]. For i=0.10 and n=5, (P/G)=6.8618. So P=G(P/G)=1,000(6.8618)=P6,861.80.
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