Time value of money

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Hi everyone! I’m literally trapped by intermediate accounting, especially when it comes to “time value of money”. Well here is my question: How to recognize if a question requires “present value of ordinary annuity” or It mentions to “future value of ordinary annuity”? I’m unable to understand it! I found things like if the question says “deposit” it means “ FV-OA” and if it says “pay” it means “PV-OA” is it true? I’de be thankful for any helps.
 

kirby

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Unfortunately, there is no magic wand for this. What has to happen is that you must very carefully read and understand the problem to see what is being asked for. A problem like" You have won the lottery and will get $xx every year for 20 years when the interest rate is YY%- so how much is that worth now?" Looking at the word "now" tells you to use PV-OA.
Whereas a problem that says how much should you deposit each year at YY% interest to have $xx in 10 years is asking for use of the FV-OA formula to get the annual deposit amount. Plus after you do the calculations look at the answer you got and ask yourself "Does this answer make sense?"
 

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