The calculation of a standard annuity, using the PMY function of Excel or a financial calculator, will produce an insufficient income because that approach fails to consider ________.

Question

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The calculation of a standard annuity using PMT function of Excel or a financial calculator does not consider inflation. This can lead to an insufficient income as the purchasing power of money decreases over time due to inflation. Therefore, it is important to consider inflation while calculating the annuity in order to ensure that the income generated by the annuity keeps pace with the cost of living.

The Calculation of a Standard Annuity, Using the PMY Function