CFA CFA Level 1 TVM Anyone has methods/exercices for easily solving annuity due problems?

TVM Anyone has methods/exercices for easily solving annuity due problems?

  • This topic has 3 replies, 3 voices, and was last updated Oct-17 by chewbaKa.
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    • chewbaKa
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      Hello everyone!!

      Question on TVM

      I’d be glad to have a good technique to easily solve annuity due problems
      (Diagrams, etc)

      Thx

    • vincentt
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      Hi @chewbaKa‌ , are you referring to the calculation of FV for annuity due?

      In case you are, there are 2 approaches to this:

      1. To use the BGN, and do your calculation as though it’s a normal FV calculation (non annuity due):

      Steps to switch between BGN and END

      • Press [2ND] [BGN] to display the BGN/END worksheet. (Resetting the unit sets this to END, not BGN.)
      • Press [2ND] [SET] to change to beginning-of-period payments. BGN is displayed.
      • Press [2ND] [SET] again to return the setting to end-of-period payments. END is displayed.
      • Press [2ND] [QUIT] to exit.

      2. To multiply the non-annuity due’s FV by the rate for the period.

      For example:
      N = 10; Rate = 9%

      After computing the FV, you just multiply FV by 1.09 to get the FV for annuity due.

      My preferred method as it’s much quicker.

    • mitch895
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      Agree with @vincentt – get to know your calculator. Once you get the hang of which buttons/functions do what, you’ll save a bucket load of time (and there’s less chance you’ll stuff something up).

    • chewbaKa
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      sure. after practicing, doesnt seem that hairy to me (and i’m chewbaka 😉 )

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