SI_Session_November_9 - Present Value & Bonds MGMT 200...

Info iconThis preview shows pages 1–6. Sign up to view the full content.

View Full Document Right Arrow Icon

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

View Full DocumentRight Arrow Icon

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

View Full DocumentRight Arrow Icon

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

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

Unformatted text preview: Present Value & Bonds MGMT 200 SI November 9, 2009 Price of Milk 1950 - 1970 One Dollar in 1970 is worth less than in 1950. You need more to buy one gallon of milk. Time Value of Money 1950 1955 1960 1965 1970 $0.824 $0.924 $1.04 $1.052 $1.318 Present Values of future $ 1950 1955 1960 1965 1970 $1 What was a 1970 Dollar worth in 1950? i = Average Inflation Rate 1950 1969: 2% n = Number of Periods: 20 years Variables: $1 1970 = $0.6730 1950 (PV, n=20, i=2%) $0.6730 from PV Table = 0.6730 Present Value of an Annuity What is an Annuity? An annuity is a series of constant payments i.e. annual interest payments to your bank an $300 interest payment in 2006 is not the same as an $300 interest payment in 2007. In 2005 Dollars, $300 $300 an $300 interest payment in 2006 is not the same as an $300 interest payment in 2007. In 2005 Dollars, $300 $300 (PV, n=1, i=7%) from PV Table = 0.9346 (PV, n=2, i=7%) from PV Table = 0.8734 2005 Dollars: $280.38 $262.02 x 0.9346 x 0.8734 (assume 7% rate) 1.8080 + = $542.4 = $542.4 $300 x Present Value of an Annuity (PV, n=1, i=7%)...
View Full Document

This note was uploaded on 01/29/2010 for the course MGMT 201 taught by Professor Rowe during the Spring '08 term at Purdue University-West Lafayette.

Page1 / 13

SI_Session_November_9 - Present Value & Bonds MGMT 200...

This preview shows document pages 1 - 6. Sign up to view the full document.

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