Formula of annuity, Financial Accounting

In common terms the future value of an annuity or regular annuity is specified by the subsequent formula:

FVAn = A (1 + k )n -1 + A (1 + k )n - 2 + ... + A   ................................Eq(6)

1133_Formula of annuity.png

A [((1 + k)n - 1)/k]

Future value of an annuity due:

FVAn(due) = A (1 + k )n + A (1 + k )n - 1 + ... + A(1 + k)   ................................Eq(6)

2093_Formula of annuity1.png....................................Eq(7)

= A [((1 + k)n - 1)/k] (1 + k)

Here FVAn = Future value of an annuity that has a duration of n periods

A   = Constant periodic cash flow;

 k = Interest rate per period;

n = duration of the annuity.

The term [((1 + k)n - 1)/k] is considered to as the future value interest factor for an annuity (FVIFAk,n). The value of its factor for some combinations of k and n are specified in the appendix at the end of this section.

Posted Date: 4/9/2013 2:34:34 AM | Location : United States







Related Discussions:- Formula of annuity, Assignment Help, Ask Question on Formula of annuity, Get Answer, Expert's Help, Formula of annuity Discussions

Write discussion on Formula of annuity
Your posts are moderated
Related Questions
Indicate by check mark ("9") or "X" which accounts are found on the income statement and which accounts are found on the balance sheet.   Account Name In

Joe has two children, Sydney age 5 and William age 2, that he wants to provide for their education funding.  Currently, tuition is $10,000 per year and tuition inflation is 6%.  Jo

How to prepare a bond amortization sheet

The income elasticity of money demand is 2/3. Real income is expected to grow by 4.5% over the next year, and the real interest rate is expected to remain constant over the next ye

Peter has worked for five years as an assistant accountant for a large garage and vehicle repair workshop. In the past two weeks he has noticed that one of the managers, Simon, ha

An investment will pay $200 at the end of every of the next 3 years, $400 at the end of Year 4, $600 at the end of Year 5, and $800 at the end of Year 6. If other investments of eq

Balance Sheets: contains the balance sheets as of December 31, 2010, 2009, and 2008. Accounting practice and tradition dictates that the most current year is placed nearest to the

1. Jepsen Corp had the following transactions relating to shares of stock: • Issued 1,000 shares • Purchased 100 shares • Re-issued 50 shares • Declared and distributed a 2-1 stock

1.Which of the following is true? A. Land is depreciated using the straight line depreciation method B. Land is amortized using the declining balance method C. Land is depleted usi

Q. Which of the following is not true of a corporation? a. It may buy, own, and sell property. b. It may sue and be sued. c. The acts of its owners bind the corporation. d. It may