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Accumulation and Accumulation Factor

S

sfischer

Member
In section 1.3, the text uses the term A(n) as the accumulation factor - also borne out in the example 2.4 where A(n)=1.15. However in 4.1, the formula seems to use A(n) to be the actual accumulated amount also shown in example 2.9 where A(n) and A(n-1) are the bank balances (or accumulated amounts) as opposed to the accumulation factors. Can someone please help explain - thanks.

Stewart.
 
1. Accumulation Factor A(n) is Actual Accumulated amount of 1 invested at t=0. Formula in sec4.1 is also qouted with same meaning of A(n).
2. But in ex2.9 we haven't given info about A(n), which is usual in such type ques. So we solve it with the data available.
3. Suppose for ex2.9(ii) Investment at t=0 is £3000. Accumulated value at t=1 is £3300; which we can consider as
£3K * A(1).
4. As per formula 'i' is
= [A(1)-A(0)] / A(0)
= [A(1)-1]/1
in above step we dont know A(1), so multiply numerator n denomenator with initial investment £3K
= [3K*A(1)-3K]/3K
now look again at point (3.)
= [3300-3K]/3K
which we did exactly in example.
 
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