悉尼大学资本市场与公司财务课件Lecture2.ppt

Types of annuity: Ordinary annuity Cash flows occur at the end of each period and, hence, the first cash flow occurs at the end of the first year Annuity due Cash flows occur at the beginning of each period and, hence, the first cash flow occurs immediately Deferred annuity The first cash flow in an annuity is delayed by x periods Annuities (cont) A four-year ordinary annuity paying $100 cash flows would look like this The future value of the four payments of this annuity can be calculated by compounding each cash flow forward to the fourth year and adding them together Future value of an annuity 100 0 100 2 3 4 1 100 100 To determine the accumulated value of an ordinary annuity of $A : where: FV = the accumulated or future value of the annuity A = the cash flow received/paid under the annuity n = the number of cash flows that form the annuity r = the compound interest rate per period Note: 1) There is no cash flow at time 0 2) There is a cash flow at time n (2.10) Future value of an annuity (cont) Example 2.12 At the end of each year, you place $500 in an account that earns 5% interest p.a. compounded annually. How much will be in the account at the end of five years? ______________________________________________ Future value of an annuity (cont) The present value of an annuity can also be found by discounting the individual cash flows The present values of the four components of this annuity can be calculated by discounting each cash flow to the present and adding them together Present value of an annuity 100 0 100 2 3 4 1 100 100 Example 2.13 If you receive $100 at the end of each year for four years, what is the value of these cash flows if the current rate of interest is 5% p.a. compounded annually? Present value of an annuity (cont) PV1 $100 x (1 + i)-1 $100 / 1.05 $95.24 PV2 $100 x (1 + i)-2 $100 / 1.1025 $90.70 PV3 $100 x (1 + i)-3 $100 / 1.1576 $86.39 PV4 $100 x (1 + i)-4 $100 / 1.2155 $82.