but we have also seen it with variable annuities and just about every other financial product being offered to the public. By way of observation‚ this commentary typically lags reality... not keeping pace with the investing public who are relying on this type of commentary to make good decisions with their money‚ much like the regulatory environment that governs our industry in delivering their critique. Example: I am not a huge fan of the variable annuity for instance‚ because I think that there
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Annuities # 2 Time Value of Money (TVM) Understanding how the time value of money works can be most easily explained by taking your initial investment let us say $10 by the end of year five it could be worth $100. This means you have earned $90 in the last five years. Next year‚ you invest $10 and at the end of year five it is worth $80 because interest has not accumulated on the time that was lost between year 1 and year 2. My example of this is that my fiancé put $3000 in each of his
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Ning Huang Hui Zhen Eldwin Quek Kiok Liang James Chua Ming Loon Quantitative Skill 2011 CONTENT PAGE Page 1: Title Page Page 2: Contents Page 3: Executive Summary Page 4: Table 1 [Financial Plan for 20 Years invest in stock‚ ordinary annuity & annuity due] & Company Background Page 5: Table 2 [Comparison of investment options in term of risk and return] & Chart 1 [Comparison of capital and return for investment] Page 6: Recommendations for Part 1 Page 7: Table 3 [Renting compared to buying
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an ordinary annuity = R (PVF -) a) Present value of an ordinary annuity = $30‚000 (PVF -) = $30‚000 (4.96764) = $149‚029.20 b) Present value of an ordinary annuity = $30‚000 (PVF -) = $30‚000 (8.31256) = $249‚376.80 c) Present value of an ordinary annuity = $30‚000
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interest n= number of periods Future Value of an Annuity The future value of an annuity is the sum of all the payments (receipts) plus the accumulated compound interest on them. In computing the future value of an annuity‚ it is necessary to know (1) the interest rate‚ (2) the number of compounding periods‚ and (3) the amount of periodic payments or receipts. Formula: FVoa= PMT [((1+i)n-1)/i) Where: FVoa = Future Value of an Ordinary Annuity PMT = Amount of each payment i = Interest Rate
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applicable if the loan or financial obligation due now Finding the Size of Each Payment The size of the periodic payment to settle a debt is highly dependent on the time the payment is made. For ordinary annuity ? ?=? 1 − 1 + ? −? For annuity due ? ?=? 1 − 1 + ? −? 1 + ? For deferred annuity ? 1+? ? ?=? 1 − 1 + ? −? Example The cash price of a shopping equipment was P 120‚000. Alex bought it with a down payment P 20‚000 and the balance was payable at the end of every quarter for two years.
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Retirement Annuity Sunrise Industries wishes to accumulate funds to provide a retirement annuity for its vice president of research‚ Jill Moran. Ms Moran‚ by contract‚ will retire at the end of exactly 12 years. Upon retirement‚ she is entitled to receive an annual end- of-year payment of $42‚000 for exactly 20 years. If she dies prior to the end of the 20-year period‚ the annual payments will pass to her heirs. During the 12-year “accumulation period‚” Sunrise wishes to fund the annuity by making
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back to the present at 20 percent 5-5A. (Compound annuity) What is the accumulated sum of each of the following streams of payments? $500 a year for 10 years compounded annually at 5 percent $100 a year for 5 years compounded annually at 10 percent $35 a year for 7 years compounded annually at 7 percent $25 a year for 3 years compounded annually at 2 percent 5-6A. (Present value of an annuity) What is the present value of the following annuities? $2‚500 a year for 10 years discounted back to
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what is the present value of your winnings? Answer: (It is an annuity of 50’000 each year for 20 years) Exercise 3 Rusty Steele will receive an annuity of $10‚000 for the next 10 years; at the end of the next three years (that is year 11‚ 12‚ 13) he will get the following payments: $4‚000‚ $7‚000‚ and $9‚000. At a discount rate of 10 percent‚ what is the present value of all future benefits? Answer: In this case we have an annuity of 10000 for 10 years and then 3 single cash flows of 4000‚ 7000
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1. Consider a 1-Year $10‚000 CD A. The future value of a $10‚000 CD that has a maturity of 1 year at maturity with 10% interest is $11‚000. Financial Calculator Inputs: $ -10‚000=PV‚ 1=N‚ I=10‚ FV=? ($11‚000) B. The future value of a 1-year‚ $10‚000 CD after one year at an interest rate of 5.0% is $10‚500. Financial Calculator Inputs: $-10‚000=PV‚ 1=N‚ 5=I‚ FV=? ($10‚500) The future value of a 1-year‚ $10‚000 CD after one year at an interest rate of 15.0% is $11‚500. Financial
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