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Suppose Nick was establishing an fascination bearing account at his area lender while his Buddy Pete was setting up an annuity together with his inventory broker. Nick's account might be governed by the 1st equation, whilst Pete's account will be governed by the second.
The problem we desire to consider now's: How would we compute the current value of an annuity? Discover that the second equation has no P in it, so we cannot only remedy for P as we did in the 1st equation. In a way, We're going to look at both equations alongside one another by pondering the next condition.
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