The additivity principle: Dollar amounts indexed at the same point in time are additive.
Suppose we are considering two series of cash flows (A and B). The annual interest rate is 5%. We want to know the future value of combined cash flows at t = 3.
We can use this principle to solve many uneven cash flow problems if we add dollars indexed at the same point in time. Consider a cash flow series, A, with $100 indexed at t = 1, 2, 3 and 5, and $0 at t = 4. This series is an almost-even cash flow, flawed only by the missing $100 at t = 4. How do we find the present value of this series?
|BRENDAMBITHE: YOUR study notes are simply the best although this is my first time I find them easy to understand|
|odette: I really agree with you. I couldnt read QM from the text sent to me. But i am really enjoying reading it now.|
|TammTamm: I understand this now but it would be nice to have a couple of basic questions.|
|lisalett: I don't understand the lack of sample questions.|
|Metalpro: I totally agree with BRENDAMBITHE. The notes will surely help me a lot.|
|vixignus: yeah these are good|
|VikramJ: we need questions!|
|TiredHand: Analyst Notes describes it SO MUCH BETTER THAN THE CFA textbook.|
| MNSaleem: I need help here, i am confused that through which formula The Future Value of Series A is determined, as t = 3 i expect calculation like 100 x 1.05(3) + 100 x 1.05(2) + 100.|
OR also i think formula for Future value of regular annunity should be used.
So please some one make me clear. Thanks.
| ybavly: @MNSaleem|
The diagram will make it clear. We are looking for the value AT t=3 not at the end of the year t=3.
This is still an ordinary annuity. The FV here happens on t=3 which is the first day of year 3. So, we simply add the $100 because there was no time to reinvest it.
|sgossett86: Using the BAII+ cf key makes solving uneven cash flows very simple.|
| Chl4072: Not understand at all|
How to find it by using TI..?
|saika: Analyst Notes, you should create a tutorial for using cashflows. a small video for the calculator functions would help tremendously! Thanks.|
| shanshan34: please upload a video. this is a little confusing|