chapter 2 Notes

# chapter 2 Notes - • Present Value of an Ordinary 4 What...

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1 BUS 320 Chapter 2 Notes

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2 Times Value of Money Most important concept in finance. Future Values A dollar today is worth more than a dollar to be received in the future. Why? If you had the dollar today you could invest it, earn a return and end up with more tha a dollar in the future. Compound Interest Occurs when interest is earned on the prior periods interest. Simple Interest Occurs when interest is not earned on interest.
3 Calculations for this class Future Value of a Single Sum Present Value of a Single Sum. Future Value of an Ordinary Annuity.

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Unformatted text preview: • Present Value of an Ordinary. 4 What Type of Problem is it? • I will give the formulas on the exam. • The trick is that you will need to know what type of calculation(s) is required to determine the answer. 5 Future Value of a Single Sum FV = PV (1+i) n PV is present value I is interest rate or rate of return N is the number of compounding periods (could be years, months etc.) • Significance of time. • Significance of return 6 Present Value of Single Sum PV = FV (1+i) n...
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chapter 2 Notes - • Present Value of an Ordinary 4 What...

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