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10 Cards in this Set
- Front
- Back
- 3rd side (hint)
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Present Value of $1
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-Amount that must be invested now at a specific interest rate so that $1 can be paid or received in the future.
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-Ex's: capital lease buyout (at end of lease), bond principal payoff at end of term, U.S. savings bond.
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Future Value of $1
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-More easily understood as compound interest. Amount that would accumulate at a future point in time if $1 were invested now.
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-Interest factor causes the future value of $1 to be greater than $1.
-Ex: bank savings account |
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Present Value of an Ordinary Annuity
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-Current worth of a series of identical periodic payments to be made in the future.
-Payments are made at the end of each period (also called "annuity in arrears"). |
-Ex's: periodic lease payments, periodic bond payments, winning the lottery.
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Future Value of an Ordinary Annuity
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-The sum, to be received at some point in the future, of identical periodic investments made from the present until that future point.
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-Payments are made at the end of each period (also called "annuity in arrears").
-Ex: investing in an IRA. |
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PV & FV of Annuity Due
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-Only difference from an ordinary annuity is the timing of payments.
-By adding 1.00 to the PV of an ordinary annuity of 1 for n periods, the PV of an annuity due of 1 for n + 1 periods may be found. |
-Payments/receipts occur at the beginning of each period (also called "annuity in advance").
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Present Value of $1
|
-Amount that must be invested now at a specific interest rate so that $1 can be paid or received in the future.
|
-Ex's: capital lease buyout (at end of lease), bond principal payoff at end of term, U.S. savings bond.
|
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|
Future Value of $1
|
-More easily understood as compound interest. Amount that would accumulate at a future point in time if $1 were invested now.
|
-Interest factor causes the future value of $1 to be greater than $1.
-Ex: bank savings account |
|
|
Present Value of an Ordinary Annuity
|
-Current worth of a series of identical periodic payments to be made in the future.
-Payments are made at the end of each period (also called "annuity in arrears"). |
-Ex's: periodic lease payments, periodic bond payments, winning the lottery.
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Future Value of an Ordinary Annuity
|
-The sum, to be received at some point in the future, of identical periodic investments made from the present until that future point.
|
-Payments are made at the end of each period (also called "annuity in arrears").
-Ex: investing in an IRA. |
|
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PV & FV of Annuity Due
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-Only difference from an ordinary annuity is the timing of payments.
-By adding 1.00 to the PV of an ordinary annuity of 1 for n periods, the PV of an annuity due of 1 for n + 1 periods may be found. |
-Payments/receipts occur at the beginning of each period (also called "annuity in advance").
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