1. Time Value of Money
Annuities

2. Ordinary Annuity Annuity Due 1 2 3 i% PMT PMT PMT 1 2 3 i% PMT PMT PMT
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Ordinary Annuity 1 2 3 i%
PMT
PMT
PMT
Annuity Due 1 2 3 i%
PMT
PMT
PMT PV FV 17

3. What’s the FV of a 3-year ordinary annuity of $100 at 10%?
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What’s the FV of a 3-year ordinary annuity of $100 at 10%? 1 2 3
10%
100
100
100 18

4. Financial Calculator Solution
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Financial Calculator Solution
INPUTS N
I/YR PV
PMT FV
OUTPUT
Have payments but no lump sum PV, so enter 0 for present value. 19

5. What’s the PV of this ordinary annuity?
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What’s the PV of this ordinary annuity? 1 2 3
10%
100
100
100 20

6. Have payments but no lump sum FV, so enter 0 for future value.
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INPUTS N
I/YR PV
PMT FV
OUTPUT
Have payments but no lump sum FV, so enter 0 for future value. 21

7. Find the FV and PV if the annuity were an annuity due.
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Find the FV and PV if the annuity were an annuity due. 1 2 3
10%
100
100
100 22

8. Switch from “End” to “Begin”.
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Switch from “End” to “Begin”.
Then enter variables to find PVA3 = $
INPUTS N
I/YR PV
PMT FV
OUTPUT 23

9. Switch from “End” to “Begin”.
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Switch from “End” to “Begin”.
Then enter variables to find FVA3 = $
INPUTS N
I/YR PV
PMT FV
OUTPUT
Switch your calculator from begin mode
back to end mode. 23

10. page-10
Show on the number line where the PV of the annuity due and the FV of the annuity due are calculated. 1 2 3
10%
100
100
100 22

11. Calculations using Excel (in edit mode, double click on the insert below for Excel)
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12. Calculations using Excel (in edit mode, double click on the insert below for Excel)
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13. Calculations using Excel (in edit mode, double click on the insert below for Excel)
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14. What is the PV of this uneven cash flow stream?
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What is the PV of this uneven cash flow stream? 1 2 3 4
10%
100
300
300
-50
90.91
247.93
225.39
-34.15
= PV 24

15. Input in “CFLO” register: Press CF
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Input in “CFLO” register: Press CF
CF0 = ENTER
CF1 = 100 ENTER
CF2 = 300 ENTER
CF3 = 300 ENTER
CF4 = -50 ENTER
Press NPV button I = 10% ENTER CPT NPV = (Here NPV = PV.) 25

16. Calculations using Excel (in edit mode, double click on the insert below for Excel)
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