Ordinary Annuity

Ordinary Annuity - How much will you have in 10 years?...

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Ordinary Annuity You won the lottery and will receive $20,000 at the end of each of the next five years. What are your winning worth today if you assume a 9% discount rate? 1 + = r) (1 1 - 1 r C PVA t
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Financial Calculators We’ll now use the PMT key. Note  when entering more than one amount , the signs matter. 2
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Ordinary Annuity You won the lottery and will receive $20,000 at the end of each of the next five years. What are your winning worth today if you assume a 9% discount rate? Solve for PVA Enter 5, then N 3
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Another Example…FV Annuity You plan to build an office building. You will save $20,000/year for 10 years at the end of each year (starting this year), and expect to earn 7.5%. How much will you have in 10 years? 4
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Another Example…FV Annuity You plan to build an office building. You plan to save $20,000/year for 10 years at the end of each year (starting this year), and expect to earn 7.5%.
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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 paymentsthe 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 5-1...
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Ordinary Annuity - How much will you have in 10 years?...

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