Download presentation

Presentation is loading. Please wait.

Published byRoman Feathers Modified over 3 years ago

1
Dish of the day: annuity Designed and cooked by: Matt Fraser Yevgeniy Kalininskiy

2
Ingredients Definition of annuity Finding PV and FV Difference between Due and Immediate Continuous annuity Special kind of annuity: perpetuity Examples of annuities using calculator Questions?

3
Annuities A series of payments made at equal intervals of time Interest rate - rate at which interest is paid Payment period – the interval between annuity payments Payment amount – amount paid at each payment period (not always constant)

4
Key definitions

5
Annuities cont. The present value of the annuity n = number of terms i = interest rate payable at the end of the period Accumulated value of the annuity

6
Due and Immediate Immediate – an annuity under which payments of 1 are made at the end of each period for n periods Due – an annuity in which payments are made at the beginning of each period for n periods

7
Continuous Annuity Continuously compounding interest rate The frequency of payments is infinite

8
Exercise Payments of $100 at end of the year for 10 years at 8% effective interest rate. What is the PV? What is the FV?

9
Calculator Exercise Payments of $100 at end of the year for 10 years at 8% effective interest rate. What is the PV? What is the FV? Clear TVM Set END Pmt = 100, N = 10, I/Y = 8, FV = 0 CPT PV = 671.008 Pmt = 100, N = 10, I/Y = 8, PV = 0 CPT FV = 1,448.656

10
Exercise #2 You want to retire at 62 with $1 million in you IRA. You expect a 8% rate of return and you start investing on your 22 birthday and your last investment is on your 61 st birthday. How much do you need to invest each year. Set to beginning N = 40, I/Y = 8, PV = 0, FV = 1 Mil, CPT PMT = 3,574.224

11
Perpetuities Perpetuity – annuity that continues indefinitely Same as annuities, there are perpetuities due, immediate and continuous

12
Varying annuities Arithmetic varying annuities – annuities that increase or decrease by a fixed amount

13
Arithmetic Excercise 1 st payment of 1000 increases by 100 every year, i=8%, n=10. Find the PV. P = 1000, Q = 100 PMT = P+Q/I, FV = -n*Q/I, N = 10, I/Y=8, CMP PV = 9,307.7628

14
Varying annuities Geometric varying annuities – annuities that increase or decrease by a fixed percent

15
Varying Exercise 1 st payment 1000, payments decrease by 2% every period, i=8%, n=5. What is the PV of this annuity?

Similar presentations

OK

Special Annuities Special Annuities1212 McGraw-Hill Ryerson© 12-1 Special Situations Chapter 12 McGraw-Hill Ryerson©

Special Annuities Special Annuities1212 McGraw-Hill Ryerson© 12-1 Special Situations Chapter 12 McGraw-Hill Ryerson©

© 2018 SlidePlayer.com Inc.

All rights reserved.

To ensure the functioning of the site, we use **cookies**. We share information about your activities on the site with our partners and Google partners: social networks and companies engaged in advertising and web analytics. For more information, see the Privacy Policy and Google Privacy & Terms.
Your consent to our cookies if you continue to use this website.

Ads by Google

Ppt on content development definition Ppt on different sectors of economy Ppt on central limit theorem sample Ppt on rabindranath tagore in english Ppt on objectives of business communication Ppt on hindi class 10 Ppt on south african culture videos Ppt on coffee shop business plan Ppt on teamviewer free Ppt on save water for class 6