presentValue: Present value of a series of cash flows

In lifecontingencies: Financial and Actuarial Mathematics for Life Contingencies

Present value of a series of cash flows

Description

This function evaluates the present values of a series of cash flows, given occurrence time. Probabilities of occurrence can also be taken into account.

Usage

presentValue(cashFlows, timeIds, interestRates, probabilities, power = 1)

Arguments

cashFlows	Numeric vector of cash flows. Must be coherent with timeIds.
timeIds	Numeric vector of time points where cashFlows are due.
interestRates	A single numeric interest rate or a numeric vector of the same length as timeIds used to discount cash flows.
probabilities	Optional numeric vector of occurrence probabilities. If missing, a vector of ones (certainty) is assumed.
power	Numeric power applied to discount and cash flows. Defaults to 1.

Details

Present value of a series of cash flows.

Evaluate the present value (or actuarial present value when probabilities are provided) of a vector of cash flows occurring at given time instants and discounted by provided interest rates.

probabilities is optional; when omitted a sequence of 1's with the same length as timeIds is assumed. Interest rate may be a fixed number or a vector of the same size as timeIds. The power parameter is normally unused except in specialised actuarial evaluations.

Value

A numeric scalar representing the present value of the cash flow vector, or the actuarial present value if probabilities are provided.

Note

This simple function is the kernel working core of the package. Actuarial and financial mathematics ground on it.

Author(s)

Giorgio A. Spedicato

References

Broverman, S.A., Mathematics of Investment and Credit (Fourth Edition), 2008, ACTEX Publications.

Examples

# simple example
cf <- c(10,10,10)    # $10 payments one per year for three years
t  <- c(1,2,3)       # years
p  <- c(1,1,1)       # payments certainty
presentValue(cashFlows = cf, timeIds = t, interestRates = 0.03, probabilities = p)

lifecontingencies documentation built on Nov. 28, 2025, 1:07 a.m.