Annuities and Perpetuities

# Annuities and Perpetuities - N where 1/i 1/i(1 i N is the...

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Perpetuity 2 Perpetuity 1 0 1 N N+1 A/i A/i Assume that we have 2 perpetuities: Perpetuity 1 has payments in Periods 1 through , while Perpetuity 2 has payments in Periods N+1 through . If I subtract Perpetuity 2 from Perpetuity 1, I am left with an N-Period annuity. If both perpetuities are evaluated as of Period 0: A/i - (A/i)*(1/(1+i) N ) = A [ 1/i - 1/i(1+i)
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Unformatted text preview: N ] where [ 1/i - 1/i(1+i) N ] is the PVIFA i%,N Then what I have is the present value of an N-Period annuity evaluated as of Period 0. If both perpetuities are evaluate as of Period N: (A/i)*(1+i) N- A/i = A [ ((1+i) N- 1)/i ] where [ ((1+i) N- 1)/i ] is the FVIFA i%,N Then what I have is the future value of an N-Period annuity evaluated as of Period N....
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## This note was uploaded on 02/11/2011 for the course FIN 3403 taught by Professor Tapley during the Spring '06 term at University of Florida.

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