How to calculate the future value of an annuity, Financial Management

Assignment Help:

Calculate the Future Value of an Annuity:

Annuity is stated as periodic payment every period for a number of periods. This periodic payment is the same each year only then it could be known as an annuity. Compound value (future value) of this annuity can be computed by using a different formula:

2257_Annuity.png

Here A is the constant periodic cash flow (annuity), i is the rate of return for one period and n is the number of time periods. Term within the brackets is the compound value factor of an annuity.  We may also use the tables given at the end of the text book to calculate compound values of the cash flows and formula would change to:

Future Value = Annuity * (Future Value Annuity Factorn,i)

Extending the same illustration we used above, if we were going to pay 7000 $each year for the next 20 years what is the value at the end of 20 years if interest rate was 5 % compounded annually.

 


Related Discussions:- How to calculate the future value of an annuity

Underwrite, Under write An arrangement under which the investment b...

Under write An arrangement under which the investment banks agree to purchase a certain amount of privacy of a new issue (typically an IPO) at a given date for a given pric

Shoppers stop, how are indian customers visiting shoppers stop

how are indian customers visiting shoppers stop

Corporation, Corporation - Form of doing business pursuant to a charter gra...

Corporation - Form of doing business pursuant to a charter granted by a state or federal government. Corporations mainly are characterized by the issuance of freely transferable CA

Interest rates over the business cycle, Interest rates are the key de...

Interest rates are the key determinants of business cycles in emerging market countries. In the past, several economies had experienced frequent and great changes

Explain transaction exposure, How would you explain transaction exposure? H...

How would you explain transaction exposure? How is it different from economic exposure? Answer:Transaction exposure is the sensitivity of comprehend domestic currency values of

What is nondiversifiable risk? how is it measured, What is nondiversifiable...

What is nondiversifiable risk? How is it measured? But for the returns of one-half the assets in a portfolio are flawlessly negatively correlated with the other half-which is e

Project, AThe project is expected to have an initial outlay of $200million ...

AThe project is expected to have an initial outlay of $200million and generate cash inflows of $64million for the next 12 yearssk question #Minimum 100 words accepted#

Investment of surplus cash, I need a report on the topic Investment of Surp...

I need a report on the topic Investment of Surplus Cash. Can you please assist me for Investment of Surplus Cash report for about 2000 words?

Show limitations of profit maximization, Q. Show Limitations of Profit maxi...

Q. Show Limitations of Profit maximization? The Profit maximization criterion is criticized on the following grounds: i) Quality of Benefits: Profit maximization approach ig

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd