• We are pleased to announce that the winner of our Feedback Prize Draw for the Winter 2024-25 session and winning £150 of gift vouchers is Zhao Liang Tay. Congratulations to Zhao Liang. If you fancy winning £150 worth of gift vouchers (from a major UK store) for the Summer 2025 exam sitting for just a few minutes of your time throughout the session, please see our website at https://www.acted.co.uk/further-info.html?pat=feedback#feedback-prize for more information on how you can make sure your name is included in the draw at the end of the session.
  • Please be advised that the SP1, SP5 and SP7 X1 deadline is the 14th July and not the 17th June as first stated. Please accept out apologies for any confusion caused.

accumulated value

M

mayughodake9

Member
as in time value money we get accumulated value and also get accumulated value by annuity we also get accumulated value. what is difference between in both?

eg. find accumulated value of 1000 after 10 years @10%

1000(1+0.1)^10 =2594
and
by annuity give
1000* [(1+0.1)^10 -1 ]/(0.1) =15937.42

why we dont get same ans as both gives us accumulated value?
 
The answer differs both because you are accumulating a different amount of capital and over different amount of time.

In the first case you have 1000 accumulated for 10 years

In the second case you have 10,000 split into ten 1,000 payments accumulated for 9,8,7,6,5,4,3,2,1,0 years (assuming first payment is at t=1, not t=0 - this is what you've calculated anyway)

So the amount of capital differs firstly (1,000 vs 10,000) - if we were to set the annuity payments so total capital was 1,000 i.e. ten payments of 100 we would get an accumulated value of 1,593.74 (still less than 2594).

The difference remaining here is due to the timing of the cashflows over the ten years rather than all at the beginning.
 
You must log in or register to reply here.
Back
Top