B200.F09.W11.Finance.Clsnts

B200.F09.W11.Finance.Clsnts - BUAD 200 Fall 2009 Week 11...

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BUAD 200 Fall 2009. Week 11: Financial Asset Valuation (Chapter 19) 1. The interrelationships between the Present Value (PV); Future Value (FV) and the interest rate (i%) of Financial assets and investments. A. Interest Rate : (i%) 1. The interest rate is the premium paid for the earlier availability of goods. 2. The interest rate is always expressed as a percentage of the present value. 3. The interest rate is by convention expressed as an annual percentage even on assets with less than a year to maturity. 4. The following terms are the same thing: interest rate =internal rate of return=yield to maturity 5. The interest rate on any particular security will reflect the degree of risk of that security. B. Investments: moving forward thru time: A PV invested at i% per year, grows by a factor of (1+i%) [investment factor] for each year (n) invested to become a future value (FV). Therefore: FV n = PV (1+i%) n Implications: 1. The larger the amount invested (PV), the larger the future value (FV) 2. The higher the interest rate (i%), the larger the future amount (FV)
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This note was uploaded on 11/07/2009 for the course BUAD 200x at USC.

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B200.F09.W11.Finance.Clsnts - BUAD 200 Fall 2009 Week 11...

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