1.7 Week3 Lect2 TVM PT5 Calc Excel

# 1.7 Week3 Lect2 TVM PT5 Calc Excel - TVMPart5Using...

This preview shows pages 1–16. Sign up to view the full content.

TVM – Part 5  Using  Financial Calculators and  Excel Week 3 Lecture 2

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

View Full Document
Three Ways to Solve Time Value  of Money Problems Use Equations Use Financial Calculator Use Electronic Spreadsheet
Types of Problems Future Value Present Value Uneven Cash Flow Streams Time for Funds to Accumulate Future Value of an Annuity Present Value of an Annuity EAR Amortization

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

View Full Document
After 1 year: FV 1 = PV + Interest 1  =  PV + PV (I) = PV(1 + I) = \$100 (1.10) = \$110.00. After 2 years: FV 2 = PV(1 + I) 2 = \$100 (1.10) 2 = \$121.00. After 3 years:  FV 3 = PV(1 + I) 3 = 100 (1.10) 3 = \$133.10. In general,  FV n  =  PV (1 + I)n Future Value

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

View Full Document
Solve this equation by plugging in the  appropriate values: Numerical (Equation) Solution = + n n FV PV(1 I) PV = \$100, I = 10%, and n =3 \$133.10 0) \$100(1.331 \$100(1.10) FV 3 n = = =
There are 4 variables.  If 3 are known,  the calculator will solve for the 4th. Financial Calculator Solution = + n n FV PV(1 I)

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

View Full Document
Financial Calculator
Financial Calculator

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

View Full Document
INPUTS OUTPUT   3  10 -100       0 ?  N I/YR    PV     PMT FV       133.10 Here’s the setup to find FV: Clearing automatically sets everything to 0, but for  safety enter PMT = 0. Set: P/YR =  1, END Financial Calculator Solution
Spreadsheet Solution Set up Problem Click on insert function and  choose Financial/FV

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

View Full Document
Spreadsheet Solution Reference cells: Rate = interest  rate, k Nper = number of  periods interest is  earned  Pmt = periodic  payment PV = present value  of the amount
Present Value Present value  is the value today of a future cash flow or  series of cash flows. Discounting   is the process of finding the present value  of a future cash flow or series of future cash flows; it is  the reverse of compounding. Example What is the PV of \$100 due in three years if r = 10%?

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

View Full Document
100 0 1 2 3 10% PV = ? What is the PV of \$100 due in  three years if I = 10%?
n  =  PV (1 + k ) n   for PV: ( 29       n n n n FV 1 PV  =    = FV 1+ I 1+ I ( 29 \$75.13   =   0.7513 \$100   =          1.10 1 \$100   = PV  3 What is the PV of \$100 due in three years if I = 10%? This is the numerical solution to solve for PV.

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

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

## 1.7 Week3 Lect2 TVM PT5 Calc Excel - TVMPart5Using...

This preview shows document pages 1 - 16. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online