Annuities Under Random Rates of Interest II

Abstract

Some attempts were made to evaluate the future value (FV) of the expected value and the variance for various cash flows (CF). The motivation stemmed from some recursive formulas. This method does not apply directly to the evaluation of present values (PV). One can get some estimates for the PV using results about the FV. We will present a direct approach to evaluate the PV of both factors for some CF. It will turn to be similar to that used to evaluate the FV. Furthermore it makes it possible to study the PV of these CF directly, and may suggest a method to study some other CF as well.

Keywords: Random Rates of Interest, Independent variables, Expected value

JEL Classification: E50, E51