THE GENERAL ANNUITY CASE OF TIME VALUE OF MONEY: A PEDAGOGICAL APPROACH
- People & Global Business Association
- Global Business and Finance Review
- Vol.1 No.2
-
1996.1283 - 88 (5 pages)
- 4
Most finance and related textbooks implicitly assume -in the case of annuity- that the frequency of compounding and the number of payments per year are equal. In this paper; we provide more accurate general equations that permit the equality and the inequality of the number of compounding periods and the number of payments per year. The correct formulation is beneficial to practitioners, regulators and software developers working with annuities because the correct formulas are important in applications related to capital budgeting, pension funds, bond valuation, and bond portfolio immunization.
Abstract
INTRODUCTION
LITERATURE REVIEW
DERIVATION OF THE GENERAL EQUATIONS
COMPARISON WITH STANDARD EQUATIONS
THE GENERAL EQUATIONS IN TERMS OF EFFECTIVE INTEREST RATE
SUMMARY AND CONCLUSIONS
ENDNOTES
REFERENCES
BIOGRAPHIES
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