

FlashChat  Actuarial Discussion  Preliminary Exams  CAS/SOA Exams  Cyberchat  Around the World  Suggestions 

Financial Mathematics Old FM Forum 

Thread Tools  Search this Thread  Display Modes 
#1




A very basic question
I have a problem that states:
What deposit made today will provide for a payment of $1000 in 1 year and $2000 in 3 years, if the effective rate of interest is 7.5%? The solution that it gives is: PV = 1000v + 2000v^3 at 7.5% = $2540.15 (v = 1.075^(1)) at first I do not understand how does this solution work, until I do the following: (PV(1+i)  1000)(i+i)^22000 = 0 and solves for PV actually gets me the above solution PV = 1000v+2000v^3 My question is, how to quickly get the solution without going through the process of the te4dious algebraic expression like me? or is my step necessary? Thank you~ 
#2




Draw a timeline. You'll see that the 1,000 needs 1 year of discounting and 3 years for the 2,000.
__________________
"I'm tryin' to think, but nuthin' happens!" Last edited by Breadmaker; 12022018 at 01:28 AM.. Reason: 1 
#3




You can always use the cash flow work sheet and the NPV function.

Thread Tools  Search this Thread 
Display Modes  

