Futurevalueofanannuitydue文件材料.ppt

Chapter 13 Annuities Due 13.1 Future value of an annuity due Annuity due: an annuity with payments at the beginning of the payment intervals is called an annuity due. 0 1 2 3 4 n-1 n R R R R R R Term of the annuity Payment interval Interval number The beginning of an annuity refers to “the start of the annuity’s term” or “the start of the first payment interval”. It does coincide with the first payment in an annuity due. 0 1 2 3 4 n-1 n R R R R R R Ordinary annuity The date of the last payment The end of the annuity Beginning of the annuity 0 1 2 3 4 n-1 n R R R R R R Annuity due The date of the last payment The end of the annuity Beginning of the annuity Future value of an annuity due ---FV(due) The future value of an annuity is the single amount at the end of the annuity, that is economically equivalent to the annuity. 0 1 2 3 4 n-1 n R R R R R R Future Value Using the Algebraic Method 0 1 2 3 4 n-1 n R R R R R R 0 1 2 3 4 n-1 n R R R R R R FV FV(due) Future value using the algebraic method 0 1 2 3 4 n-1 n R R R R R R -1 FV FV(due) FV(due)=FV(1+p) Future value of an annuity due j=8% compounded semiannually i=j/m=8%/2=4% term=60-27=33 years payment interval=half year n=33*2=66 p=i=4% R=$2000 Solution: 27 28 29 60 birthday $2000 $2000 $2000 $2000 $2000 $2000 Algebraic method Financial calculator method +/- PV PMT n 1/Y FV 2000 0 66 4 BGN mode 640,155.60 Stan will have $640,155.60 in his RRSP at age 60. CPT Example To the nearest dollar, how much will Stan accumulate in his RRSP by age 60 if he makes semiannual contributions of $2000 starting on his 27th birthday? Assume that the RRSP earns 8% compounded annually and that no contribution is made on Stan’s 60th birthday.