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Hi My name is Melissa, I have been away from ACCA for several years and recently restarted my studies, so it’s a bit difficult to follow topics at the moment because I am trying to catch up.
I just viewed one of the lecture videos which talked about measurement – the present value method. I saw in one of your responses to a student in the comments how you worked out the annuity factor. How I am still struggling to work out how you got the 6.463 as the factor to use.
this is the formula I saw in your response to the student comments
the 6.463 has come from the formula 1/r[1 – (1/(1+r)^n)], were r = 0.05 and n = 8.but I still didn’t get the same figure… so can you explain a little more please
Melissa
Hi,
Welcome back!
You will be given annuity factors in the FR exam so you don’t need to worry about how to calculate them, which is a bonus.
If you’re desperate to know how to tap the numbers into the calculator then you could always look at the MA paper (old F2).
Thanks
An annual rent of $2000 is to be received for 10 successive years with the first payment due tomorrow. The relevant rate of interest is 8%. Calculate the present value of this stream of cashflows.
The answer given is $14,494.
Can you please explain me sir how that answer arrived!
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