ACF329 Annuity Symbols; What you need to know for Midterm 1
1. An “annuity” is a sequence of equally spaced payments. The length of time between two con
secutive payments is called the “interest period.” In the examples below, time is measured
in units of interest periods. So “time 2” is two interest period after “time 0.” For example, if
the interest period is 1 month, then time 3 is three months after time 0. If the interest period
is 6 months, then time 3 is eighteen months after time 0.
For Midterm 1, you need to know what the annuity symbols,
a
n
i
,
s
n
i
, ¨
a
n
i
, ¨
s
n
i
,
a
∞
i
,
¨
a
∞
i
represent. These are described in Sections 3.2–4. Unless otherwise speciﬁed, assume
compound interest. Drawing time lines with the payments written in may be helpful to un
derstand these concepts.
(a) Example:
a
10
2%
is the total value at time 0 of ten $1 payments. The payments are
made at times 1, 2, 3, .
.. , 10. The interest rate per interest period is 2%. Therefore,
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 Spring '08
 HIETMANN
 Finance, 1 month, total value, Texas Instruments Business Analyst

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