Quantitative Finance Formulae Unit Annuity due

I: Interest, P : Principal, i: i nterest rate, t: time

P V : än i = 1 + an−1 i = an (1 + i)
Interest accumulation: F V = P V + I
Simple interest: F V = P V (1 + i t) F V : s̈n i = sn (1 + i)
t
Compound Interest: F V = P V (1 + i)
Deferred Annuity
Simple discount: D = F V × d × t
Compound Interest PV : k| an = an (1 + i)−k
(m)
Nominal annual rate compounded m times/year: iA
FV : k| sn = sn
Effective rates conversion, time unit: year (A, An-
1
num) subdivided into m and n periods: Perpetuity Annuity, P V : a∞ i = i , ä∞ i = 1+ 1i
Variable Payment Annuities

m
n
1 + iA/m = 1 + iA/n Increasing arithmetic progression annuity:

Annual Nominal Rate & Effective Rate versus (C − h)an i + h (Ia)n i

Equivalent Annual Rate
än i − n(1 + i)−n
!m (Ia)n i =
(m)
iA i
(1 + iA ) = 1+
m Decreasing arithmetic progression annuity:
! n−an i
1/m i
(m) (D − h)an i + h (Da)n i ; (Da)n i = i
(1 + iA ) = 1+ A
m Geometric progression annuity:
h i
(m) 1/m P : 1st Payment; i: Interest Rate; g: Growth Rate
iA = m (1 + iA ) −1
  n 
1 − 1+g
1+i
P 
i−g
Continuous compounding
Nominal rate, Force of Interest: Leasing
AC: Asset Cost; R : Lease Periodic Payment; DP :
δ = ln(1 + iA ) ⇔ eδ = 1 + iA Down Payment; RV : Residual Value:

F V : S = P eδt ; P V : P = S e−δt AC = DP + R an i + RV (1 + i)−n

Annuities, Unit Payment Annuity
Unit Annuity immediate R = R∗ + I

I = RV × i
1 − (1 + i)−n
P V : an i =
i PV = AC − DP = R∗ an i
(1 + i)n − 1
F V : sn i = = an (1 + 1)n R∗ : Payment on Loss; I: Interest on Residual.
i