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Unformatted text preview: Example 4.1 Example 4.1: Suppose an annuity pays $1000 every 5 years for 35 years. The rate of interest is 5% per year effective. Find the present value and the accumulation value at the expiration date for a) payments in advance; b) payments in arrear. C. Weng (c2weng@uwaterloo.ca) p. 2/1 3 Example 4.2 Example 4.2: Suppose an annuity pays $100 every month for 15 years. The interest rate is 5% per year effective. Find the present value of the annuity for a) payments in advance b) payments in arrear C. Weng (c2weng@uwaterloo.ca) p. 4/1 3 Continuous constant annuities Consider an annuity of $1 per period payable continuously for n periods. Assume the effective interest rate is i per period. Present value is denoted by a n . Formulae: a n = 1 v n , where is the equivalent constant force of interest corresponding to the interest rate i and hence = ln(1 + i ) ....
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This note was uploaded on 01/21/2011 for the course ACTSC 231 taught by Professor Chisholm during the Fall '09 term at Waterloo.
 Fall '09
 Chisholm

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