Lecture 6

# Lecture 6 - FIN 311 Instructor Syed Walid Reza Lecture 6...

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FIN 311 Instructor: Syed Walid Reza Lecture 6 Spring 2016

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Today Announcements Exam 1: In-class exam during usual lecture time Review class before the exam You can use either a scientific or a financial calculator You will given a formula sheet You would not be asked to derive ANY formula Understanding formulas Chapter 6 2
Annuity Future Value Future value of Annuity t = 0 2 4 6 8 C C C C C C C C Annuity PV Annuity PV 3

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Examples You are saving for a new house and you need 20% down to get a loan. You put \$10,000 per year in an account paying 8%. How much will you have at the end of 3 years? You are saving for a new house and you need 20% down to get a loan. You put \$10,000 per year in an account paying 8%. The first payment is made today. How much will you have at the end of 3 years? 4
Annuity Due It has all the characteristics of an Annuity, but its cash flow starts at the beginning of the period So, how should we price it?

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