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L16_ECE4001_Spring_2011

# L16_ECE4001_Spring_2011 - Relate Future to Present Values...

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1 Slide #1 ECE 4001 L16 T. Michaels © 2011 Lecture 16 Time Value of Money Problem Examples Slide #2 ECE 4001 L16 T. Michaels © 2011 F/P P/F Relate Future to Present Values Slide #3 ECE 4001 L16 T. Michaels © 2011 The interest rate used to determine the present value of future cash flows. When expressed in the form below, then i is call the discount rate. (See page 333 of Hyman) Discount Rate ( / ) (1 ) Discount Rate n P P F F F i i - = = + = ° Slide #4 ECE 4001 L16 T. Michaels © 2011 A. Interest compounded yearly end

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2 Slide #5 ECE 4001 L16 T. Michaels © 2011 Suppose that you deposit \$1000 at the end of each month for a period of one year, i.e., 12 payments total of \$1000 each. A. What is your account balance at the end the 12 th month, one the day that you make your last payment, if the bank compounds interest annually? B. What is your account balance at the end the 12th month, one the day that you make your last payment, if the bank compounds interest monthly? Monthly Payment Example Slide #6 ECE 4001 L16 T. Michaels © 2011 Use (F/A,i,n) factor for all “annualized”,
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