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APPENDIX
C
Time Value of Money
APPENDIX OVERVIEW
This appendix addresses the difference between simple interest, which is computed on principal
only, and compound interest, which is computed on both principal and interest earned that has not
been paid or withdrawn.
Simple interest is the product of the principal, the rate, and the time, but the
formula used for compound interest depends on whether you are solving for the present value or
future value and whether the amount involved is a single sum or an annuity (a series of equal dollar
amounts paid or received periodically).
The appendix in your textbook has a thorough discussion of
these concepts.
Appendix C contains the following study objectives:
1.
Distinguish between simple and compound interest.
2.
Solve for future value of a single amount.
3.
Solve for future value of an annuity.
4.
Identify the variables fundamental to solving present value problems.
5.
Solve for present value of a single amount.
6.
Solve for present value of an annuity.
7.
Compute the present value of notes and bonds.
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View Full DocumentKimmel Accounting:
Tools for Business Decision Making
C2
APPENDIX SELF TEST
As you work the exercises and problems, remember to use the
Decision Toolkit
discussed and
used in the text:
1. Decision Checkpoints
: at this point you ask a question.
2. Info Needed for Decision
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 Fall '07
 Davila
 Accounting, Time Value Of Money, Interest

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