Class Notes (834,143)
Lecture 2

4 Pages
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School
Department
Course
Professor
Anna Dodonova
Semester
Fall

Description
e.g, how much my father had to invest in 1985 so that by 1996 I had \$10 000 to pay my tuition, when the apr was 3% per year 1996 - 1985 = 1 1 ANSWER: 10, 000 / ((1 + 0.03)^11) annuities: C / (1 + r) + C / ((1 + r)^2)….+ C / ((1 + r)^n) —> this can become C + C / ((1 + r)^2)….+ C / ((1 + r)^n-1) (1 + r)m = m - [C / ((1 + r)^n)] + C REVIEW e.g, how much money i had in my account in may 15 2007 so that in may 15 2017 i have \$150, with an annual R of #% per year? 2017 - 2007 = 10 years ANSWER: 150 / ((1 + 0.03)^10) QUIZ MATERIAL: —>look at picture above! if we have several identical payments or withdrawals in ﬁnite (whole) numbers, the question will be how much to deposit today to be able to make theses withdrawals ANSWER t = 0 to t=3: 100/ (1 + I) + 100 / ((1 + I)^2) + 100 / ((1 + I)^3) Annuity formula (based on ﬁnite payments): e.g, if I deposit \$30 every month for the next 4 years, how much will i accumulate on my account on January 15, 2021 if the ﬁrst deposit is made today, January 15, 2017, the monthly R is 0.5% —> 12 months * 4 Years = 48 0——-12——24——36——48 ANSWER: 30 (1 + 0.05)^48 + 30 (1 + 0.05)^47 + 30 (1 + 0.05)^46 + …… 30 (1 + 0.05)^1 —> or we can use this equation….. Value DEC 15 (it goes a month back with this equation): [30 * (1 - (1/ ((1 + 0.005)^48)))] / 0.005 VALUE JAN 15 2021 = Value DEC 15 * (1 + r)^49 EQU for Quiz: = [paymen
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