TimeValueExamplesS2018.pdf

# TimeValueExamplesS2018.pdf - Time Value Examples Example...

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Time Value Examples

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Example Discounting — One Period Time Preference – 2 Consider the value of a single payment of \$26.00 received at the end of period “one” at the end of period “zero”. And assume that the nominal interest rate is 4%.
Example Discounting — One Period Time Preference – 2 Consider the value of a single payment of \$26.00 received at the end of period “one” at the end of period “zero”. And assume that the nominal interest rate is 4%. 0 1 2 3 4 1 2 3 4

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Example Discounting — One Period Time Preference – 2 Consider the value of a single payment of \$26.00 received at the end of period “one” at the end of period “zero”. And assume that the nominal interest rate is 4%. 0 1 2 3 4 1 2 3 4 \$26
Example Discounting — One Period Time Preference – 2 Consider the value of a single payment of \$26.00 received at the end of period “one” at the end of period “zero”. And assume that the nominal interest rate is 4%. 0 1 2 3 4 1 2 3 4 \$26 We compute that value by dividing the value at the end of period one by “1 + the discount rate” or 1.04 in this case.

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Example Discounting — One Period Time Preference – 2 Consider the value of a single payment of \$26.00 received at the end of period “one” at the end of period “zero”. And assume that the nominal interest rate is 4%. 0 1 2 3 4 1 2 3 4 \$26 We compute that value by dividing the value at the end of period one by “1 + the discount rate” or 1.04 in this case. V 0 = 26 (1+ i ) = 26 (1 . 04) =25
Example Discounting — Two Periods Time Preference – 3 Consider the value of a single payment of \$10.816 received at the end of period “two” at the end of period “zero”. And assume that the nominal interest rate is 4%.

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Example Discounting — Two Periods Time Preference – 3 Consider the value of a single payment of \$10.816 received at the end of period “two” at the end of period “zero”. And assume that the nominal interest rate is 4%. 0 1 2 3 4 1 2 3 4
Example Discounting — Two Periods Time Preference – 3 Consider the value of a single payment of \$10.816 received at the end of period “two” at the end of period “zero”. And assume that the nominal interest rate is 4%. 0 1 2 3 4 1 2 3 4 \$26

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Example Discounting — Two Periods Time Preference – 3 Consider the value of a single payment of \$10.816 received at the end of period “two” at the end of period “zero”. And assume that the nominal interest rate is 4%. 0 1 2 3 4 1 2 3 4 \$26 \$10.816
Example Discounting — Two Periods Time Preference – 3 Consider the value of a single payment of \$10.816 received at the end of period “two” at the end of period “zero”. And assume that the nominal interest rate is 4%. 0

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