Accounting: The Language of Business - Vol. 2 (Intermediate: Part 101)

The stupid and dishonest accountants allowed the genie of totally inappropriate accounting to descend on derivatives books. And once this has happened - people get status, etc. - it's impossible to get it back into the bottle.

Charlie Munger

 Accounting and the Time Value of Money (Part K)

by

Charles Lamson

Spreadsheet Solution for the Future Value of an Annuity Due. To solve for the future value of an annuity due with a spreadsheet application such as Microsoft Excel, input the following variables into a spreadsheets cell:

= FV(I/Y,N,PMT,PV,type) 

For the future value of an annuity due, we put a 1 in the fifth position because the payments occur at the beginning of each period period

Financial Calculator Solution for Future Value of Annuity Due Problems. Finally, future value of annuity due problems can be solved using a financial calculator. To solve the problem in Example 7.20, enter the following keystrokes.

The calculator shows the future value of the annuity due is $2,076,158.77. These keystrokes correspond to an outflow of $100,000 for 16 compounding periods at a 3% interest rate per compounding period. The fourth row of keystrokes adjusts the calculator settings to “ beginner mode” because this is an annuity due with the payments occurring at the beginning of the period as opposed to an ordinary annuity (the default mode) where the payments occur at the end of the period. 

*GORDON, RAEDY, SANNELLA, 2019, INTERMEDIATE ACCOUNTING, 2ND ED., PP. 338-339*

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