Linear Interpolation

# Linear Interpolation - N = 4 I/YR = 2.25 PMT = \$1 Solve for...

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As an example, look at the partial table below (complete tables are included in the exam handout). Suppose that you wanted to find the present value of a 4-year annuity at an interest rate of 2.25 percent. Since the interest factor for 2% is 3.8077 and the interest factor for 3% is 3.7171, we would interpolate between the two to find the interest factor for 2.25% IF = 3.8077 - (3.8077 - 3.7171)*(.25) = 3.78505 This compares to an actual value of
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Unformatted text preview: N = 4; I/YR = 2.25; PMT = \$1; Solve for PV = 3.78474 Present Value Interest Factors of an Annuity: PVIFA i,N = [ (1/i) - (1/(i)*(1+i) n ) ] Period (n) 0% 1% 2% 3% 4% 5% 6% 1 1.0000 0.9901 0.9804 0.9709 0.9615 0.9524 0.9434 2 2.0000 1.9704 1.9416 1.9135 1.8861 1.8594 1.8334 3 3.0000 2.9410 2.8839 2.8286 2.7751 2.7232 2.6730 4 4.0000 3.9020 3.8077 3.7171 3.6299 3.5460 3.4651 5 5.0000 4.8534 4.7135 4.5797 4.4518 4.3295 4.2124...
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