Unravel your potential in banking with Learning Sessions’ expert-led JAIIB courses, your first step toward career advancement and success in the industry. In the Accounting and Financial Management (AFM) module of the JAIIB, calculating the future value of an annuity due is a fundamental concept that helps banking professionals forecast the accumulated value of investments with periodic payments made at the beginning of each period. This understanding is crucial in financial planning, allowing bank employees to assist clients in estimating the growth of investments and savings. In this article, we will explore the future value of an annuity due, and walk through a practical case study.
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DOWNLOAD PDF CALCULATING FUTURE VALUE OF AN ANNUITY DUE -CASE STUDY
An annuity due is a series of equal payments made at the start of each period, unlike an ordinary annuity where payments are made at the end. Calculating the future value of an annuity due involves determining how much a series of these beginning-period payments will acquire over time when compounded at a specific 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 future value (FV) of an annuity due is generally higher than that of an ordinary annuity due to the additional period of compounding for each payment.
The formula to calculate the future value of an annuity due is slightly modified from that of an ordinary annuity to account for the additional compounding.
FV annuity due=P×((1+r)n−1)r ×(1+r)
Where:
- P = Payment per period
- r = Interest rate per period
- n = Number of periods
- (1 + r) = Adjusting factor for annuity due, as payments are made at the beginning of each period
To summarize, the topic of calculating the future value of an annuity due in the JAIIB AFM module is influential for banking professionals. It offers them the tools needed to accurately project and manage client investments, ensuring they can give sound financial advice. Learning Sessions provides additional information about JAIIB AFM CASH FLOW by giving examples of real life scenarios.
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CALCULATING FUTURE VALUE OF AN ORDINARY ANNUITY
