appc - APPENDIX C Time Value of Money APPENDIX OVERVIEW...

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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only, and compound interest, which is computed on both principal and interest earned that has not been paid or withdrawn.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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Kimmel Accounting: Tools for Business Decision Making C-2 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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appc - APPENDIX C Time Value of Money APPENDIX OVERVIEW...

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