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(1 i)n [Eq. 4.11; factors in Table A–2] Future value of an ordinary annuity:
n FVIFAi,n (1 i)t 1 [Eq. 4.13; factors in Table A–3] t=1 Present value of an ordinary annuity:
t=1 (1 i) [Eq. 4.15; factors in Table A–4] Present value of a perpetuity:
i [Eq. 4.17] Future value with compounding more frequently than annually:
for continuous compounding, m ∞: FVIFi,n (continuous compounding) ei n [Eq. 4.20] to find the effective annual rate:
m [Eq. 4.21] Basic equations
Future value (single amount):
Present value (single amount): FVn PV
PV FVn (FVIFi,n)
(PVIFi,n) [Eq. 4.6]
[Eq. 4.12] Future value (annuity): FVAn PMT (FVIFAi,n) [Eq. 4.14] Present value (annuity): PVAn PMT (PVIFAi,n) [Eq. 4.16] CHAPTER 4 Time Value of Money 171 a. What amount would Ms. Martin have at the end of the third year, leaving all
interest paid on deposit, in each bank?
b. What effective annual rate (EAR) would she earn in each of the banks?
c. On the basis of your findings...
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