fin3331 021202 tvm lump perp

# fin3331 021202 tvm lump perp - 1 9 9 = = FV How long at 9...

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Fin3331.0925 fin3331.0212 Time value of money Future value of lump sum What is the future value of \$1.00, if it is left to accumulate at 7 percent? 07 . 1 ) 07 . 1 ( 1 = + = FV 1449 . 1 ) 07 . 1 ( 2 2 = + = FV 225 . 1 ) 07 . 1 ( 3 3 = + = FV 3108 . 1 ) 07 . 1 ( 4 4 = + = FV 4026 . 1 ) 07 . 1 ( 5 5 = + = FV (FVIF) Present value of lump sum What is the present value of \$1.00, to be received at the end of 5 years, if the discount rate is 7 percent? = = + = 07 . 1 1 ) 07 . 1 ( 1 1 PV .9346 = = + = 1449 . 1 1 ) 07 . 1 ( 1 2 2 PV .8734 = = + = 225 . 1 1 ) 07 . 1 ( 1 3 3 PV .8163 = = + = 3108 . 1 1 ) 07 . 1 ( 1 4 4 PV .7629

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= = + = 4026 . 1 1 ) 07 . 1 ( 1 5 5 PV .7130 (PVIF) What would .7130 grow to, if left to accumulate at 7 percent for 5 years? Rule of 72 How long would it take \$1.00 to double, at 7 percent interest? Guess: 10 years. Try it out. 9672 . 1 ) 07 . 1 ( 10 10 = + = FV Pretty good guess. Hint 10 X 7 72 How long at 8 percent? Guess 9 years. 8 X 9 = 72 Try it out. 9990 . 1 ) 08 .
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Unformatted text preview: 1 ( 9 9 = + = FV How long at 9 percent? Guess 8 years. 9 X 8 = 72 9926 . 1 ) 09 . 1 ( 8 8 = + = FV N i = 72 Where N is the number of years, and i is the interest rate, expressed as a whole percentage number. Perpetuities How much money would you need, earning 7 percent interest to collect \$100 per year forever? .07 PV = 100 PV = 1428.57 Annuities How much would you need earning 7 percent, to collect \$ 100 per year for 5 years? Perpetuity = 1428.57 Perpetuity delayed 5 years = 1428.57(.7130) =1018.57 PV of 5 year annuity = 1428.57 – 1018.57 = 410.00 Use of calculator N= 5 PMT = 100 FV=0 I=7 CPT PV = -410.02...
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fin3331 021202 tvm lump perp - 1 9 9 = = FV How long at 9...

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