There are some exam questions with compound increasing annuity using the formula:

PVF=1/(1+e) [ (1-(1+j)^-n) / j] , where j = (i-e)/(1+e), where 'e' is the percentage increase of payment each year.

I noticed some similar exam questions are answered using the geometric series formula to solve for the increasing values:

a[1+r+r^2+....+r^(n-1)] = a[ (1-r^n)/(1-r)]

I am confused at situations that use one formula versus the other. Can someone help explain what's the difference in using the two formulas and in what situations should each one be used.

Thanks a lot!

PVF=1/(1+e) [ (1-(1+j)^-n) / j] , where j = (i-e)/(1+e), where 'e' is the percentage increase of payment each year.

I noticed some similar exam questions are answered using the geometric series formula to solve for the increasing values:

a[1+r+r^2+....+r^(n-1)] = a[ (1-r^n)/(1-r)]

I am confused at situations that use one formula versus the other. Can someone help explain what's the difference in using the two formulas and in what situations should each one be used.

Thanks a lot!

## Comment