ABSTRACT
Assume that the amount of annuity at the end of n years is F, while A is the uniform yearly periodic payment to be invested at i interest yearly rate.
By the end of the annuity term: The 1st payment A should have a value FI = A(l + i)n-I The 2nd payment A should have a value F2 = A(l + i)n-2
The last payment A, should have a value Fn = A Finally the sum of all payments will be F, where:
F = A(l + i)n-I + A(l + i)n-2 + --- + A(l + i) + A Hence, it can be shown that
F = A[(l + i)n - 1] 1
(5.11)
The above factor [(1 + i)n factor or sinking fund factor.
