# Actuarial Science 2053 Lecture Notes - Lecture 10: Discounting, Promissory Note, Raw Image Format

by OC775254

This

**preview**shows pages 1-3. to view the full**16 pages of the document.**Discounted Values (section 2.3)

Given: S, n, i

Determine: P

In other words, we wish to determine how

much we need to invest today, P, in order to

have S at the end of n-interest periods, if we

can earn i per period

Recall

S = P (1 + i)

n

Thus,

P = S (1 + i)

−n

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Only pages 1-3 are available for preview. Some parts have been intentionally blurred.

Notes

1. The term (1 + i)

−n

is called the discount

factor

2. P is called the discounted value OR

present value of S

•

we are discounting at a compound

interest rate

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Only pages 1-3 are available for preview. Some parts have been intentionally blurred.

Example 2.3.1

How much money would have to be deposited

today in an account paying j4 = 7% in order to

have $10,000 in 3 years time?

Solution to 2.3.1

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