Timing of payments
A student just asked this question:
I have a question on your video solution of this problem. Right after you have the line: S’angle’10 – S’angle’9 = 3.5, you draw 2 time diagrams and start the S’angle’9 diagram at 2 and end it at 10. Then you subtract S’angle’9 from S’angle’10 and end up with 1 payment at time 1. My question is why does the first payment for S’angle’9 start at time 2 and not time 1? Why does the last payment come at time 10? I hope my question is clear otherwise let me know and I will clarify further.
My response was:
s-angle-10 means the accumulated value of 10 payments of 1 at the time of the last payment. Notice in those words it doesn’t mention anything about the time of those payments.
For example, if I have payments of 1 at times 1, 2 and 3. Then the value of those 3 payments at time 3 is s-angle-3. If I have payments of 1 at times 15, 16, and 17. Then the value of those 3 payments at time 17 is s-angle-3. If I have payments of 1 at times 100, 101 and 102. Then the value of those payments at time 102 is s-angle-3.