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    Value of an annuity with varying rates of return

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    You are considering buying a 3 year, $2500 annuity (annual payments). You receive the first payment in exactly one year. The required rate of return is 10% for year 1, 6% for year 2, and 5% for year 3. What is the value of this annuity?

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    Solution Preview

    Given the variant return rate, we have to calculate each payment of the annuity for the ...

    Solution Summary

    The solution explains how to calculate the value of annuity when the interest rate changes each year. The answer is shown in the solution.