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Unformatted text preview: How much will you have in 10 years? • Solve for FVA 5 Annuity Due • Like an Ordinary Annuity, an Annuity Due meets the same tests: – The payments are the same. – They occur in the same frequency. – There is a finite number of payments. – There is no period where a payment is 6 Cash Flow Timing • Before we said to assume that the first payment occurs one period from the present (or, at the end of the period). • Say, an Ordinary Annuity calls for five, annual $20,000 payments…the PVA formula assumes the cash flows occur as follows: 7 1 2 3 4 $20,000 $20,000 $20,000 $20,000 $20,000 5 1 2 3 4 $20,000 $20,000 $20,000 $20,000 $20,000 5 Cash Flow Timing  PV • The PVA formula (and the calculator) will value these cash flows as of t =0 (one period before). 8 1 2 3 4 $20,000 $20,000 $20,000 $20,000 $20,000 5 1 2 3 4 $20,000 $20,000 $20,000 $20,000 $20,000 51...
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 Spring '12
 VictorWakeling
 Frequency, Annuity, Net Present Value

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