Chapter 5 - Terms: PV- present value: amount that occurs...

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

View Full Document Right Arrow Icon
Chapter 5: intro to the time value of money A dollar earned today is worth more than 0 dollar earned tomorrow Things to consider: 1. Magnitude 2. Timing 3. Opportunity cost of saving -required return If I wait to earn $1, I am giving up earning interest Valuation- underlies the decision in almost ll financial questions V0= E PV of all future cash flows 4 valuation methods 1. Formula 2. Tables 3. Calculator 4. Spreadsheet Chapter 5: Time value of money Present value Future value Compounded interest- earn interest on interest
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: Terms: PV- present value: amount that occurs today FV- future value: amount at some point in the future R- Interest rate (calculator I/y): the periodic interest rate earned on the investment t- Number of periods (also called n) i) When are are valuating a cash flow ii) When a future cash flow occurs iii) The number of cash flows in on annuity Excel FV function =FV(rate, nper, pmt, pv, type)...
View Full Document

Page1 / 2

Chapter 5 - Terms: PV- present value: amount that occurs...

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