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Week 3, Legend - Coggle Diagram
Week 3
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Annuities
Financial contracts that call for equally spaced and level cash flows over a finite number of periods
When valuing annuities, rather than compounding/discounting each cash flow individually, a single formula can be applied
2 Types
Ordinary
Most annuities are structured so that the cash payments are paid or received at the end of each period. These are the most common annuities
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(aka. Annuity in Arrears, Deffered Annuity)
If nothing is said about cash flows, always assume it is an ordinary annuity
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Legend
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I or R
Interest rate, discount or compound rate
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