Financial Ch 4

Annuity Stream of Cash Flow Payments

a set of level cash flows occurring each time period for a fixed length of time

Ordinary Annuities

Annuities where the payments occur at the end of each time period

Annuities due

Annuity streams with payments occurring at the beginning of each time period

Perpetuity

An annuity stream where the payments occur forever

Stated Annual Interest

The interest rate expressed in contracts with the frequency of compounding

Effective Annual Rate

the interest rate expressed as if it were compounded once per year

Annual percentage rate

the interest rate charged per period multiplied by the number of periods per year

Future Value

C x (1+r)^t

FV factor

(1+r^t

Present Value

C/(1+r)^t

PV facor

1/(1+r)^t