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Author Topic: Exam Inquiry  (Read 921 times)

Offline Actuaryguy65

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Exam Inquiry
« on: October 24, 2020, 05:08:40 PM »
Hey guys! I am new to this forum and I have been studying for exam FM now for less than a month and need some general help.  Specifically, I am trying to understand the different types of annuities such as the annuity due and annuity immediate.  I specifically struggle to remember when we discount to find present values which annuity version is necessary for a specific problem.  The symbols for these annuities also confuse me and I have trouble knowing how to use my financial calculator for each type of annuity also.  Any help would be much appreciated!

Offline BlueCalculus

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Re: Exam Inquiry
« Reply #1 on: October 25, 2020, 04:50:33 PM »
The easiest way to remember the difference from an annuity due versus immediate is that when calculating the present value of an annuity immediate we look back one period before the first payment so the present value is evaluated one period before the first payment is made whereas an annuity due the present value is calculated as of the date of the first payment.  In terms of symbolic answers, an annuity due uses double dot notation, due for dots, and an annuity immediate has no dots above the a(angle) symbol.  On the other hand we can also calculate future values going forward in time using due and immediate forms.  For example, the future value of a due is one period after the final payment and the future value if an immediate is on the exact date of the last payment it is the reverse of the present value due and immediate forms.  Hope that helps.