Help - annuities (1 Viewer)
- Thread starter jodi..1
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yosemite sam
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- Nov 12, 2006
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- 2007
isn't one present value and one future value? if tahts what youre after future value is what it will be worth in the future, present is what you have to put in NOW to get a certain amount in the future. the question usually tells you which you need to use and theyre on the formula sheet.
KirrynAlane
Member
find out what 'M' means in the one of the equations. thats the difference between them. like, if they need $25000 in 20 years and you need to calculate the lump sum then u use the one without 'M' in it. lol ... i think.
my brain is fried, i jst did my trial maths exam today hahaha :S
my brain is fried, i jst did my trial maths exam today hahaha :S
Got this off the formula sheet.
http://img92.imageshack.us/img92/8143/formulakq0.jpg
Yeah so one is for finding the future value other is for present value.
Same sort of thing that yosemite said. Present value can be used to find the single amount that can be invested to recieve the same outcome. Future value is obviously just finding the future value of an annuity. The present value formula can also be used to find the amount of each monthly repayment in a reducing balance loan.
EDIT: Just re-read what you meant. The top present value formula is used for when you dont know the future value. The bottom is used for when you do as A = Future Value.
Yeah so one is for finding the future value other is for present value.
Same sort of thing that yosemite said. Present value can be used to find the single amount that can be invested to recieve the same outcome. Future value is obviously just finding the future value of an annuity. The present value formula can also be used to find the amount of each monthly repayment in a reducing balance loan.
EDIT: Just re-read what you meant. The top present value formula is used for when you dont know the future value. The bottom is used for when you do as A = Future Value.
Last edited:
ACTUALLY ,
the present value formula with the 'A' in it.. (the shorter one) is used for when you only put in ONE amount and it like.. compounds on its own..
whereas the longer one is used for when youre going to put in money regularly eg. every month.
gets? i suck at explaining stuff. sorry, thats the best i could do.
the present value formula with the 'A' in it.. (the shorter one) is used for when you only put in ONE amount and it like.. compounds on its own..
whereas the longer one is used for when youre going to put in money regularly eg. every month.
gets? i suck at explaining stuff. sorry, thats the best i could do.
Everyone is kinda right.
For an annuity, the PRESENT VALUE is the amount you need to invest NOW AS A SINGLE LUMP SUM to reach a certain goal in the future.
The formula with the A in it is used if you know what that financial goal is. A is the "future value". For example, how much would I need to invest NOW AS A SINGLE LUMP SUM to reach get $30000 in three years. It's actually just the compound interest formula with the subject changed.
The formula with the M in it is more complicated and is used for a more complicated situation, where you know what the equivalent monthly payment is, and you don't necessarily need to know that final goal. The M is the "monthly payment". For example, how much would I need to invest NOW AS A SINGLE LUMP SUM to reach the SAME goal as I would if I invested $30 per month for 3 years.
For an annuity, the PRESENT VALUE is the amount you need to invest NOW AS A SINGLE LUMP SUM to reach a certain goal in the future.
The formula with the A in it is used if you know what that financial goal is. A is the "future value". For example, how much would I need to invest NOW AS A SINGLE LUMP SUM to reach get $30000 in three years. It's actually just the compound interest formula with the subject changed.
The formula with the M in it is more complicated and is used for a more complicated situation, where you know what the equivalent monthly payment is, and you don't necessarily need to know that final goal. The M is the "monthly payment". For example, how much would I need to invest NOW AS A SINGLE LUMP SUM to reach the SAME goal as I would if I invested $30 per month for 3 years.