Join us at Learning Sessions to master in the Accounting and Financial Management (AFM) module of the Junior Associate of the Indian Institute of Bankers (JAIIB), calculating the future value of an ordinary annuity is a crucial concept. This topic forms a major part of financial planning and investment analysis, equipping banking professionals with the skills to predict the growth of regular investments over time. In this article, we’ll examine the notion of future value in detail, and depict its significance with a case study.
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DOWNLOAD PDF CALCULATING FUTURE VALUE OF AN ORDINARY ANNUITY -CASE STUDY
An ordinary annuity consists of regular payments made at the end of each period. Calculating its future value involves determining how much a series of payments, made periodically over a specific time frame, will grow when compounded at a particular interest rate.
For the extensive preparation of candidates, get details through our YouTube videos for JAIIB AFM Module wise Syllabus with explanations and tips to help candidates in their preparation journey.
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The formula to calculate the future value (FV) of an ordinary annuity is:
FV=P× ( ( 1 + r )n – 1 ) / r
Where:
- P = Payment per period
- r = Interest rate per period
- n = Number of periods
This formula enables the banker or analyst to find the future value of a series of consistent payments by taking into account the compounding effect, which amplifies the growth of funds over time.
Similarly, In the banking sector, the future value of an annuity is a valuable tool for analyzing fixed deposits, recurring deposits, and various retirement plans. It helps financial planners forecast how much regular deposits will grow under different interest rates and time frames, aiding in strategic decision-making.
In the end, The topic of calculating the future value of an ordinary annuity in the AFM module of the JAIIB course is fundamental for banking professionals. Not only does it build their analytical skills, but it also allows them to cater effectively to clients’ financial goals. Learning Sessions provides additional information about JAIIB AFM YTM BONDS by giving examples of real life scenarios.
Learn more about this case study through our YouTube channel and PDF.
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