For an annuity due cash flows occur at the beginning

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Unformatted text preview: future value and the present value of an ordinary annuity and the present value of a perpetuity, are given in Table 4.9. LG3 Calculate both the future value and the present value of a mixed stream of cash flows. A mixed stream of cash flows is a stream of unequal periodic cash flows that reflect no particular pattern. The LG4 SELF-TEST PROBLEMS LG2 LG5 ST 4–1 Time Value of Money 169 future value of a mixed stream of cash flows is the sum of the future values of each individual cash flow. Similarly, the present value of a mixed stream of cash flows is the sum of the present values of the individual cash flows. Understand the effect that compounding interest more frequently than annually has on future value and on the effective annual rate of interest. Interest can be compounded at intervals ranging from annually to daily, and even continuously. The more often interest is compounded, the larger the future amount that will be accumulated, and the higher the effective, or true, annual rate (EAR). The annual percentage rate (APR)—a nominal...
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