{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Chapter2

# Chapter2 - Time Value of Money 1 Cash Flow Diagram(up arrow...

This preview shows pages 1–11. Sign up to view the full content.

Time Value of Money Time Value of Money 1. Cash Flow Diagram ( up arrow is inflow or plus, down arrow is outflow or minus ) 2. Inflow / Outflow 3. P.V. 4. F.V. 5. Interest or Discount Rate (I) 6. N = number of periods or years 7. a = annuity, payment (pmt)

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
Time Value of Money Time Value of Money \$110 = FV 10% interest 1 year \$100 = PV \$100 : Present Value = PV = P \$110 : Future Value = FV = F 10% : Interest rate or discount rate = i 1 year : number of periods = n
Time Value of Money Time Value of Money 50 50 50 50 1 2 3 4 \$50 : annuity or payment = pmt =pymt

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
Time Value of Money Time Value of Money 1 2 3 4 5 100 100 100 100 200 Is this an annuity? No No , because the payments are not of the same amount. Payments should be equal in every period for annuity. (Period 1-3) is annuity (Period 4-5) is not.
Time Value of Money Time Value of Money Notation Given Find Equation Book Le Table P F F n = P(1+i) n P[FVIF] P[F/P] A-3 F P P n = F[1/(1+i) n ] F[PVIF] F[P/F] A-1 a[ (1+i) n -1 ] a F F= i a[FVIFA] a(F/A) A-4

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
Time Value of Money Time Value of Money Notation Given Find Equation Book Le Table a[1-1/(1+i) n ] a P P= i a[PVIFA] a(P/a) A-2 i 1 P a a=P[1-1/(1+i) n ] P[PVIFA] P(a/P)
Time Value of Money Time Value of Money Example: FV = ? 10% N = 1 PV = 100 PV = -100 i = 10% N = 1 FV = ? FV = PV ( 1 + i ) 1 = 100 ( 1 + 0.1 ) 1 = 110

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
Time Value of Money Time Value of Money Example: n=2 Years Given P, Find F F = ? 10% 1 n = 2 2 100 F = 100 ( 1 + 0.10) 2 =P(1+i) 2 = 121
Time Value of Money Time Value of Money F n = P (1+i) n (1+i) n = F/P = FVIF F n = P[F/P] = P[FVIF]

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
Fin362 LE 10 Time Value of Money Time Value of Money Notation Given Find Equation Book Le Table P F F n = P(1+i) n P[FVIF] P[F/P] A-3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### Page1 / 52

Chapter2 - Time Value of Money 1 Cash Flow Diagram(up arrow...

This preview shows document pages 1 - 11. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online