Expected Present and Final Value of an Annuity when some Non-Central Moments of the Capitalization Factor are Unknown: Theory and an Application using R

The aim of this paper is the development of three approaches for obtaining the value of an n-payment annuity, with payments of 1 unit each, when the interest rate is random. To calculate the value of these annuities, we are going to assume that only some non-central moments of the capitalization factor are known. The first technique consists in using a tetraparametric function which depends on the arctangent function. The second expression is derived from the so-called quadratic discounting whereas the third approach is based on the approximation of the mathematical expectation of the ratio of two random variables by Mood et al. (1974). A comparison of these methodologies through an application, using the R statistical software, shows that all of them lead to different results.