0.5 The Derivation of Ordinary Annuity Factors
You are given the following information. Column by column, complete the table by filling in the appropriate future value factors (“FVF”), the future values of each respective cash flow (“FVCF”), as well as the same for the present value factors and cash flows (“PVF” and “PVCF”). Once completed, add up the columns at the bottom.
Given:
3-year annuity
$100 received per year
Annual Discounting/Compounding
Factor = R = .10
| Period | Cash Flow | FVF | FVCF | PVF | PVCF |
| 1 | $100 | ||||
| 2 | $100 | ||||
| 3 | $100 | ||||
| Annuity Factors | |||||
| Dollar Values |
Note that here we are dealing with “ordinary” annuities, which means that all the cash flows in the series are received at the end of the relevant period. Soon we will examine another convention.