Understanding Annuities and Perpetuities: A Tutorial

Рет қаралды 128,588

11 жыл бұрын

This video gives an overview of what annuities and perpetuities are and how to calculate present value of these instruments. The video also covers cases where stream of cash flows is growing at a constant rate. Focus is on calculating present value as that is the most convenient way to understand the nature of annuities and what they are worth today. This tutorial is extremely useful in understanding almost all financial instruments as concepts learnt here are directly applicable to bond and stock valuation.

Пікірлер: 32

@zimzalabimm9794 4 жыл бұрын

this is better than what my lecturer has taught. thank you

@NaughtyMissTee 4 жыл бұрын

Thanks so much, mate! I could actually follow and understand! Keep it up! 😍

@babiv3v 4 жыл бұрын

you just saved my life!!!! thanks so much!

@conchipalacios 10 жыл бұрын

Really good, thanks for posting this!

@ihatemz 10 жыл бұрын

thankyou so much! this helped me a lot!

@ahmedmabrouk5276 2 жыл бұрын

Thank you , really enjoyed it

@fadilvlogs3066 10 ай бұрын

Thanks man you saved my life ❤

@ashleymeigs7918 11 жыл бұрын

Thank you.

@angusyim4273 10 жыл бұрын

THANK YOU

@benniven4474 9 жыл бұрын

thank you

@Ahmed-jl7uh Жыл бұрын

Minute 2:46 why the minus? Can you explain how you got to the minus part?

@hamna6288 8 жыл бұрын

Thank You for posting this

@ttochoosetolive 7 жыл бұрын

What sum of money, invested today in a perpetual fund earning 8% compounded semiannually will sustain quarterly payments of $1200 with the first payment made(a) immediately? I got 83354.33(b) one year from today? ( I do not know how to calculate this but its supposed to be 79855.55) can you explain how I would go about calculating this value please??

@debocl3y139 7 жыл бұрын

Bruh

@IamGenith 5 ай бұрын

Hi, could we save this in our playlist please. It seems it is disabled. It helps us if you would allow viewers to save your video. My classmate wouldwatch it too

@emiliaarimah9637 7 жыл бұрын

I have a perpetuity of x and an initial cash outflow of y, the discount rate is unknown. How do I discern the discount rate so that I can solve for the IRR? Also, does this mean that the initial cash outflow of y is the PV of the perpetuity x? (and that the FV of initial cash outflow is y?)

@fincampuslecturehall4833 7 жыл бұрын

IRR being the discount rate that would make the PV of perpetuity equal to the initial CF? If so, then you can just do x/r = y and solve for r (the discount rate). I hope this answers both your questions. Please let me know if there is anything else.

@saurabhs4743 9 жыл бұрын

nice

@marothimohale4539 8 жыл бұрын

What do I do when I have an annuity that has a reduced final payment?

@fincampuslecturehall4833 8 жыл бұрын

+Marothi Mohale Just discount the final (reduced) value. If you are looking for a closed form solution, then the closest you can get to is by applying PV of annuity formula for n-1 payments and discounting the final payment separately.

@iffi2526 5 жыл бұрын

What is the difference between growth and interest rate ??

@fincampuslecturehall4833 5 жыл бұрын

Generally, former is the rate at which a payment grows and latter is what you discount future payment with. If you can be more precise, I would be happy to answer. Thanks

@wongso76 9 жыл бұрын

If A has negative growth, this formula should still be valid?

@fincampuslecturehall4833 9 жыл бұрын

Simon Wong Yes

@AR-jj9is 7 жыл бұрын

when r lower than g then how will calculate

@fincampuslecturehall4833 7 жыл бұрын

Then you cannot use this model as is. But think about the following questions: If growth rate is very high, do you expect certain risks priced in? If so, how would r change as a result of pricing those risks? Would that lead to r greater than g eventually? If you're looking for a way to value a company with r lower than g, you can always take the approach of using P/E multiple and multiplying it with earnings.

@chantel2689 3 жыл бұрын

king

@erinsam7821 3 жыл бұрын

gold mine

@littletutkids 8 жыл бұрын

what is 'r' means?

@fincampuslecturehall4833 8 жыл бұрын

Hi Kevin, as defined around 0:30, r is the interest rate. Thanks

@MrJustinBeiberSucks 8 жыл бұрын

Lol just buy the baii plus calculator, all you wiesels wont remember these shitty formulas and the calculator literally solves 90% of all finance-based problems.

@fincampuslecturehall4833 8 жыл бұрын

+GD_Spazzumz Depends what your aim is.