Engineering Economics: Money-Time Relationships and Equivalence - Annuities

Vocabulary flashcards covering types of annuities, standard interest factors, equations, and perpetuities based on the lecture notes.

Annuity

A series of equal cash flows occurring each period over a range of periods.

Ordinary Annuity

A series of equal payments or receipts occurring over a specified number of periods with the payments or receipts occurring at the end of each period; also referred to as annuity-immediate.

Uniform-Series Present Worth Factor

The factor notation $(P/A, i, n)$ with factor formula $\frac{1 - (1 + i)^{-n}}{i}$, used in the standard notation equation $P = A(P/A, i, n)$.

Capital Recovery Factor

The factor notation $(A/P, i, n)$ with factor formula $\frac{i}{1 - (1 + i)^{-n}}$, used in the standard notation equation $A = P(A/P, i, n)$.

Uniform-Series Compound Amount Factor

The factor notation $(F/A, i, n)$ with factor formula $\frac{(1 + i)^n - 1}{i}$, used in the standard notation equation $F = A(F/A, i, n)$.

Sinking Fund Factor

The factor notation $(A/F, i, n)$ with factor formula $\frac{i}{(1 + i)^n - 1}$, used in the standard notation equation $A = F(A/F, i, n)$.

Deferred Annuity

An annuity where the first payment is made several periods after the beginning of the annuity, computed on a different present year and/or future year.

Number of Deferred Periods ($k$)

The symbol $k$ representing the number of interest periods prior to the commencement of ordinary annuity payments.

Temporary Focal Date

A focal date used in solving deferred annuity problems to convert the deferred annuity into an ordinary annuity.

Final Focal Date

A focal date used in solving deferred annuity problems to obtain the required final value.

Annuity Due

A series of equal payments or receipts occurring over a specified number of periods with the payments or receipts occurring at the beginning of each period.

Perpetuity

A series of uniform payments which are done infinitely; also called a perpetual annuity.

Ordinary Perpetuity

A type of perpetuity where the first payment is done one period after the focal date, calculated using $P = \frac{A}{i}$.

Deferred Perpetuity

A type of perpetuity where the first payment is done several periods after the focal date, calculated using $P = \frac{A}{i}(1 + i)^{-k}$.