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Lecture 5

# Actuarial Science 2053 Lecture 5: Sep 21, 2015 Premium

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School
Western University
Department
Actuarial Science
Course
Actuarial Science 2053
Professor
Steven Kopp
Semester
Fall

Description
Equations of Value (section 1.3) Concept of Dated Values All financial decisions must take into account the time value of money For example, 100 pad today is NOT the same as 100 paid one year from now if t>0 But, 100 paid today is the same as, or equivalent to, 108 one year from now if r=8 Similarly, 100 paid today is equivalent to 100(1.08)^1 = 92.59 one year ago The values 92.50, 100 and 108 are called dated values And if the interest rate is r=8, then 92.59, 100 and 108 are equivalent to each other (NOTE: if r is not equal to 8, then the 3 values are still dated values, but they are not equivalent)
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