Study with the several resources on Docsity
Earn points by helping other students or get them with a premium plan
Prepare for your exams
Study with the several resources on Docsity
Earn points to download
Earn points by helping other students or get them with a premium plan
Students of Communication, study E-Commerce as an auxiliary subject. these are the key points discussed in these Lecture Slides of E-Commerce : Algebra, Annuities, Present Value, Ordinary Annuity, Discount, Annuity Due, Periodic Cash, Annually Compounded, Interest, Discount Rate
Typology: Slides
1 / 10
This page cannot be seen from the preview
Don't miss anything!
$^
^.
^
^
^
^
=^
^
^
^
=
-n
OrdinaryAnnuity
3
1- 1+i
PV
=PMT
i 1
1 06
100
06
267 30
^
^
^
^
-n
AnnuityDue
1- 1+i
PV
= PMT
1+i
i
●^
Present value of an
annuity due
:
PV = present value of the annuityPMT = equal periodic cash flowi = the (annually compounded) interest or discount raten = number of years
0
i,n
), where:
(^
)
-n
i,n
1- 1+i
i
PMT = cash flowi = the (annually compounded) interest or discount raten = number of periodsPVAN = present value (ordinary annuity)PVIFA = present value interest factor
Example:
What is the present value of a 3-year
$100 ordinary annuity if current interest ratesare 6% compounded annually?^ Table 4.4 Excerpt: PVIFA for $1 per period
End of Period (n)
5%
6%
10%
2
3
4
(^
=)
0
i,n
What is the present value of a 3-year
$100 annuity due if current interest rates are6% compounded annually?
Table 4.4 Excerpt: PVIFA for $1 per period^ End of Period (n)
5%
6%
10%
2
3
4
(^
)
0
i,n
i)
Sinking Fund Problems: calculating theannuity payment that must be received orinvested each year to produce a future value.
Ordinary Annuity
Annuity Due
n i,n
FVAN
(^
) n + i,n FVAN
i
-^
Financial instrument that pays an equal cashflow per period into the indefinite future (i.e.to infinity).Example: dividend stream on common andpreferred stock
$
$
$
0
1
2
3
(^4) $
