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individuals commonly prefer possession of cash immediately or in the present moment quite than the same amount at any time in the future such
pvainfin a1 k-1 a1 k-2 a1 kinfin 1 a 1 kinfinmultiplying both the sides of eq a7 by 1k providespvainfin 1 k a1 k a 1 k-1 a 1
derivation of formulasi future value of an annuityfuture value of an annuity isfvan a1 kn -1 a 1 kn - 2 a 1 k a
equation illustrates the relationship in between pvan a k and n so manipulating this a bitwe find thata pvan k 1 kn1 kn - 1k 1 kn1 kn - 1 in
in common terms the present value of a regular annuity may be shown as given belowpvnn a1 k a1 k2 a1 kn a 11 k 11 k2 11 kn a 1 kn- 1k 1
let us assume you expect to obtain rs2000 yearly for the next three years the receipt of rs2000 is evenly divided one part that is rs1000 is obtained
how much must you save annually in order to accumulate rs 20 00000 by the ending of 10 years whether the saving earns an interest of
assume that you are interested in understanding how much must be saved regularly over a period of time in order that at the ending of the period you
assume you are receiving an amount of rs5000 twice in a year for subsequent five years one time at the starting of the year and another amount of rs
compute the present value of rs 1000 receivable 6 years thus if the discount rate is 10 percentsolution the present value is computed as follows pvkn
we have discussed the computation of the future value in the previous sections here let us work the process in opposite let us assume you have won a
occasionally cash flows may have to be discounted more often than once a year semi- monthly daily annually or quarterly the outcome of this is as
assume mr ram deposits rs 10000 annually in a bank for 5 years at 10 percent compound interest rate compute the value of this series of deposits on
an annuity is explained as stream of uniform duration cash flows the payment of life insurance premium through the policyholder to the insurance
notice an rs50 000 investment in a one year fixed deposit and rolled over yearly for the subsequently two years the interest rate for the primary
determine the future value of rs1000 compounded continuously for 5 year on the interest rate of 12 percent per year and contrast it along with annual
the excessive frequency of compounding is generally continuous compounding where the interest is compounded immediately the data for continuous
one of the initial and the most general questions regarding an investment optional is the time period needed to double the investment one clear way
in the above illustration we have consider how the future value modify along with the modification in frequency of compounding so as to understand
compute the future value of rs5000 at the end of 6 years whether nominal interest rate is 12 percent and the interest is allocated payable quarterly
in our discussion so far we have supposed that the compounding is done yearly here let us see the case where compounding is complete more often
determine out the future value of rs1000 compounded yearly for 10 years at an interest rate of 10 percentsolution the future value 10 years thus
let us assume that you deposit rs1000 in a bank that pays 10 percent interest compounded yearly for a period of 3 years the deposit will grow as
after going through this section you must be capable to- identify the time value of
the concept that money has time value is one of the most fundamental notions of investment analysis for any type of productive asset its value will