Chapter 5

# Chapter 5 - Terms PV present value amount that occurs today...

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

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

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

View Full Document
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

{[ snackBarMessage ]}

### Page1 / 2

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

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online