Unit 3 Flashcards
Calculating the value of a given capital in a future
moment is called …
compounding
Calculating the value of a given capital in an earlier moment in time is called …
discounting
Annuities are defined as …
the calculated value of a set of capitals due in different moments in time.
sets of capitals due in different moments in time.
Annuities are …
a sequence of periodic payments made at equal intervals of time.
The elements of an annuity are …
- Payment interval
- Term of the annuity
- Actual payment of the annuity
The payment interval is …
the time that elapses between two consecutive capitals or terms.
Constant period annuities are …
annuities where the period is the same for the entire duration of the annuity.
“n” is …
the number of terms of the annuity.
Annuities can be grouped …
- According to the relation between the capitals
- According to the duration of the rent
- According to the moment in which the capitals are received
There are _____ types of annuities that are grouped according to the relation between the capitals, and they are:
2
- Constant annuity
- Variable annuity
Constant annuity is where ….
all capitals are equal
Variable annuity is where …
capitals are different from each other
Two of annuities that are grouped according to the duration of the rent are:
- Temporary annuity
2. Perpetual annuity
A temporary annuity is when …
when n is a natural number.
A perpetual annuity is when …
when n is infinite.
Types of annuities that are grouped according to the moment in which the capitals are received are:
- Advance or prepaid annuities
2. Overdue or postpaid annuities
Advance or prepaid annuities are when the …
capital is received at the beginning of the period.
Overdue or postpaid annuities are those where
capitals are collected at the end of the period.
Advance annuities are also called
prepaid annuity
An overdue annuity is also called
postpaid annuity
The value of an annuity is the value of a capital dated at some specific moment which is equivalent to all the payments of the annuity.
True
Discounted value of the annuity (DV) is defined as
the value of the annuity dated at the beginning of the term (t0).
Compounded value of the annuity (CV) is defined as
the value dated at the end of the term (tn).
Present value of the annuity (PV)
is the value of that annuity at the present moment.
The discounted value and the present value coincide if
the beginning of the annuity is today (immediate annuity)
The beginning of an annuity can be later than today (deferred annuity)
True
A deferred annuity is when
the beginning of the annuity is later than today
An immediate annuity is when
the beginning of the annuity is today
In an IMMEDIATE ANNUITY, DV=PV and CV=DV(1+i)^n
True