Ordinary Annuity: Payments or receipts occur at the end of each period

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9780273713654 pp03 Ordinary Annuity : Payments or receipts occur at the end of each period. Ordinary Annuity : Payments or receipts occur at the end of each period. Annuity Due : Payments or receipts occur at the beginning of each period. An Annuity represents a series of equal payments (or receipts) occurring over a specified number of equidistant periods. Student Loan Payments Car Loan Payments Insurance Premiums Mortgage Payments Retirement Savings (Ordinary Annuity) End of Period 1 (Annuity Due) Beginning of Period 1 Equal Cash Flows Each 1 Period Apart FVAn = R(1 + i)n-1 + R(1 + i)n-2 + ... + R(1 + i)1 + R(1 + i)0 FVAn = R(1 + i)n-1 + R(1 + i)n-2 + ... + R(1 + i)1 + R(1 + i)0 Cash flows occur at the end of the period Overview of an Ordinary Annuity – FVA FVA3 = $1,000(1.07)2 + $1,000(1.07)1 + $1,000(1.07)0 FVA3 = $1,000(1.07)2 + $1,000(1.07)1 + $1,000(1.07)0 = $1,145 + $1,070 + $1,000 = $3,215 Cash flows occur at the end of the period Example of an Ordinary Annuity – FVA The future value of an ordinary annuity can be viewed as occurring at the end of the last cash flow period , whereas the future value of an annuity due can be viewed as occurring at the beginning of the last cash flow period. The future value of an ordinary annuity can be viewed as occurring at the end of the last cash flow period, whereas the future value of an annuity due can be viewed as occurring at the beginning of the last cash flow period. Hint on Annuity Valuation FVAn = R (FVIFAi%,n) FVA3 = $1,000 (FVIFA7%,3) = $1,000 (3.215) = $3,215 N: 3 Periods (enter as 3 year-end deposits) I/Y: 7% interest rate per period (enter as 7 NOT 0.07) PV: Not relevant in this situation (no beg value) PMT: $1,000 (negative as you deposit annually) FV: Compute (Resulting answer is positive) Chia sẻ với bạn bè của bạn: