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Instructor%20Notes%20-%20Appendix%20to%20Chapter%206

# Instructor%20Notes%20-%20Appendix%20to%20Chapter%206 - p...

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Management 200T Time Value of Money Chapter 6 Appendix Future Value Amount accumulated when interest on an investment is compounded for a given number of periods Compounding refers to the practice of calculating interest for a period on the sum of the principal and interest accumulated at the beginning of the period. Example Formula – FV = PV (1 + r) p Future Value of an Annuity Adding an amount equal to the initial investment on a regular basis Formula – FVA = PMT ((1+ r)

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Unformatted text preview: p – 1)/ r Example Present Value Value today rather than value in future Formula – PV = FV/ ((1+r) p ) Example Present Value of an Annuity Formula – PVA = PMT (1-(1/(1+r) p ))/r example Management 200T Time Value of Money Chapter 6 Appendix Impact of Compounding Frequency with which interest is compounded affects both future value and present value Prefer to have interest income compounded more often Examples...
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Instructor%20Notes%20-%20Appendix%20to%20Chapter%206 - p...

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