Equation of Value
Free SOA Exam FM (Financial Mathematics) lesson in Time Value of Money. 13 min read, ~1,922 words.
Equation of value: PV of inflows = PV of outflows at a chosen focal date. Compound interest: any focal date works. Pick whichever simplifies the math. Unknown payment: set focal date at the payment time so has no discount factor. Unknown rate (IRR): focal date at time 0, write NPV...
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What this lesson covers
- Content
- Example 1
- Example 2
- Example 3
- Common Mistakes
- Key Takeaways
- Exam Shortcuts
Learning objectives
- 1d
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