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+--- Thread: Need help with Finance Formulas (/Thread-Need-help-with-Finance-Formulas)
Need help with Finance Formulas - LaceyLady - 09-12-2011
Could anyone who is good at finance help me? I am currently studying finance and I am in the time value of money chapter. In Barron's Finance, there is no mention of annuity due or ordinary annuity, just annuity. I know what annuity due and ordinary annuity mean, but I need to know how to calculate each. Barron's says that the formula for the future value of an annuity is FV = P*{[((1+R)^N)-1]/R} (where P is payment per period, R is interest rate, and N is number of periods) and according to what it says about an annuity, it is an ordinary annuity.
A Business Math textbook that I studied a few years ago says that the formula for the future value of an annuity due is FV = P*{[((1+R)^N)-1]/R} and an ordinary annuity is FV = P*{[1-(1+R)^-N]/R}
So this book says that the formula Barron's gives is for an annuity due.
This is making me confused. Which formula is the correct one for each type of annuity and how can one find the present/future values of an annuity due using a regular annuity table?
Need help with Finance Formulas - SmokeEm - 09-15-2011
Hey, Im not exactly sure what your asking, but I did take the clep and passed. I would definitely get a good financial calculator. Thats my two bits worth. Understand the basic time value of money formulas, don't go to deep.
Need help with Finance Formulas - LaceyLady - 09-15-2011
Okay, I might not have been clear. I would like to know how to calculate the present value and future value of an annuity due (not just an ordinary annuity).
Since posting my original post I have found out that FV = P*{[((1+R)^N)-1]/R} is the correct formula for an ordinary annuity. Now I just need to know how to calculate an annuity due.
Thanks