time+value+of+money+checkpoint

time+value+of+money+checkpoint - 3. i equals the interest...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Present Value is the current worth of a future sum of money given a specified rate of return. Future cash flows are discounted at the discount rate, higher the discount rate, lower the present value. Figuring out the right discount rate is the key to valuing future cash flows, no matter if it is earnings or obligations. 1. PV is the value at time=0 2. FV is the value at time=n 3. i is the rate at which the amount will be compounded each period 4. n is the number of periods (not necessarily an integer) Present Value of an Annuity is a number of equal payments which take place at even intervals. Examples: (leases and rental payments). Payments or receipts are at the end of each period for an ordinary annuity while they occur at the beginning of each period for an annuity due. 1. PV(A) is the value of the annuity at time=0 2. A is the value of the individual payments in each compounding period
Background image of page 1

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

View Full DocumentRight Arrow Icon
Background image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: 3. i equals the interest rate that would be compounded for each period of time 4. n is the number of payment periods The value of an asset or cash at a paticulair date in the future that is equivalent in value to a specified sum today is future value. The future value of a stream of payments (annuity), assuming the payments are invested at a given rate of interest is future value of an annuity (FVA) 1. FV ( A ) is the value of the annuity at time = n 2. A is the value of the individual payments in each compounding period 3. i is the interest rate that would be compounded for each period of time 4. n is the number of payment periods Reference: http://en.wikipedia.org/wiki/Time_value_of_money#Future_value_of_an_annuity http://www.college-cram.com/study/finance/presentations/1116...
View Full Document

This note was uploaded on 01/27/2010 for the course FIN 200 taught by Professor Bresett during the Spring '10 term at University of Arizona- Tucson.

Page1 / 2

time+value+of+money+checkpoint - 3. i equals the interest...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online