Example Of Future Value Of Annuity

Example Of Future Value Of Annuity

1- What is the future value of $34 through 5 years by %0.05 interest 

WRITE THE FOLOWING EQUATION

FV=PV(1+i)n

FV=34(1+0.05)5

FV=34(1.27628815)

FV=43.39

NFV stands for Net future value

Time Value Of Money

NFV stands  for Net future value 

You may be able to calculate the future value of an Unbalanced cash flow using your financial calculator. If your calculator has a button labeled NFV (net future value), you can enter individual cash flow , enter the interest rate ,and press The NFV button.

NFV=NPV(1+i)n

However , if your calculator does not have a net future value button , you can still user the calculator. To do so ,first find the net present value of the cash flow series. Then, multiply the net present value by one plus i raised to the power of n,with n representing the number of years until series matures.

Future value of an Unbalanced cash flow

Time Value of Money

Future value of an Unbalanced cash flow

To calculate the future value of an Unbalanced cash flow stream, first calculate the future value of each individual cash flow . once you have performed these individual calculations , add them together. Add them together . the result is total future value of the Unbalanced cash flow.

In the above equation, FV is future value, n represents the number of periods,CF stands for cash flow, i is interest rate , and t represents the current time period

Amortized Loans(consumer loans,mortgages)

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Amortized Loans(consumer loans,mortgages)
It mean that are loans that are repaid in equal payments over a set period of time , with interest included in the payment amounts . most consumer loans, including mortgages, are amortized loans

In the above equation for calculating amortized loans ,PV represents present value , PMT stands for payment, I is the interest rate is the current time period, and n is the number of periods.

Loan amortization schedule

A loan amortization schedule is a table that identifies the amount of interest in each payment.when constructing a loan amortization table. each row should represent a period of payment ,and there should  be six columns of data.

First column labeled PERIOD, second labeled BEGINNING Balance , third labeled PAYMENT , the fourth labeled INTEREST PAID, fifth labeled PRINCIPAL PAID,sixth labeled ENDING BALANCE 

Unbalanced cash flows

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Unbalanced cash flows

unbalanced cash flows are cash flows that change in amounts between periods. Examples of unbalanced cash flows include business income, royalties,allowances,or any loan structured with unbalanced payments.
When calculating uneven cash flows, you can use given equations, but you will likely have several calculations to perform .Errors have an increased extent of existing with manual calculations. Therefore, if you have a financial calculator or spreadsheet program , you should make use of it when performing uneven cash flow analyses.
Present value of an unbalanced cash flow .
The following  equation for calculating the present value of a future payment present value of an unbalanced cash flow has five variable ,PV stands for present value, n
Represents  the number of periods ,CF stands for cash flow, i is interest rate, and t represents the current time period.

Perpetuities

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What Is Perpetuity

Perpetuity is a cash flow with an infinite amount of equal payments. True perpetuities are not common , but a few still exist. One example of perpetuity is the consol, a popular government bond in great Britain that has no maturity date.

Another example of a perpetuity is preferred stock,preferred stock is an investment that resembles both and a stock , and it is a perpetuity because its fixed dividend payments could last forever.

When series of annuity payments has an unknown ending date, and the ending date is believed to be many years away, it is often easiest to assume that will continue forever, or end in perpetuity.

Example  for calculating the present value

Perpetuity formula

PV(PERPETUITY)=	PMT
	I

The equation for calculating the present value of perpetuity is as follows, in this equation, PMT represents the payment made per period, and I represents the interest rate for the perpetuity.

Annuities Due

Time Value Of Money
Annuities Due

Annuity Due Definition: annuity due is like to an ordinary annuity in that it is an even cash flow that occurs ever fixed intervals for a specific period of time however ,unlike ordinary annuities, annuity payments due occur at the beginning of each period, which means that annuities due are compounded for one extra time period than ordinary annuities. examples of annuity payments

To better understand the concept of annuities due, you should construct a time line specific to the annuity you are analyzing.

When calculating the time value of money for annuities due, buying annuities ,you can follow the same equation as single cash flows ,but you must calculate each payment individually. also remember that you should compound interest on the cash flows one time more than ordinary annuities.