Identification and Correction of a Common Fundamental Error in General Annuity Calculations

Xiaoyan Wang, Christopher Deeley

    Research output: Book chapter/Published conference paperConference paperpeer-review

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    Abstract

    We examine the conventional method of solving general annuity problems whereby a general annuity is converted into a simple annuity by imputing either an equivalent interest rate per the annuity's payment period or an equivalent payment per its conversion period. Both methods err when the frequency of payments exceeds the frequency of interest compounding. We demonstrate, possibly for the first time, a correct method for solving general annuity problems in such circumstances. We compare the results of each method and recoomend that flawed elements of current solution techniques be replaced by the method demonstrated in this paper.
    Original languageEnglish
    Title of host publicationProceedings of 2009
    Subtitle of host publicationMarketing Science Innovations and Economic Development
    Place of PublicationSydney, Australia
    PublisherOrient Academic Forum
    Pages236-241
    Number of pages6
    ISBN (Electronic)9780980768701
    Publication statusPublished - 2009
    EventSummit International Marketing Science and Management Technology Conference - Tianjin, China, China
    Duration: 12 Dec 200913 Dec 2009

    Conference

    ConferenceSummit International Marketing Science and Management Technology Conference
    Country/TerritoryChina
    Period12/12/0913/12/09

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