accting 301 appendix c min shen

# accting 301 appendix c min shen - Appendix C Time Value of...

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1 Appendix C – Time Value of Money: Future Value and Present Value Present and Future Value Concepts Time value: Money received today is worth more than money received one year from today because it can be used to earn interest. Interes t: Payment for giving up the ability to use money today. Use of the money is delayed to some future date. Assume interest rates are annual rates , unless indicated otherwise. \$1,000 invested today at 10% In 5 years it will be worth \$1,610.51 In 25 years it will be worth \$10,834.71 Present Value Future Value Interest earned during the time period = principal * interest rate per time period * time period Setting one: single amount Future Value concepts: given an amount today what is its future equivalent? Example: assume that on January 1, 2001, you deposit \$1,000 in a savings account at 10% annual interest compounded annually. What would be the balance in the account at the end of 3 years? Year

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## This note was uploaded on 02/16/2011 for the course ACCOUNTING 301 taught by Professor Chen during the Spring '10 term at George Mason.

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accting 301 appendix c min shen - Appendix C Time Value of...

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