CH04 - 4-1Chapter 4Time Value of Money4-2Example of a Time LinePoints in -3Time Line1 R1111.10Flat Term Structure—One Period4-4Time Line1 R211(1

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Unformatted text preview: 4-1Chapter 4Time Value of Money4-2Example of a Time LinePoints in timeTime321123Periods4-3Time Line1 + R1111.10Flat Term Structure—One Period4-4Time Line1 + R211(1 + R)(1 + R)Flat Term Structure—Two Periods4-5.21.101.20.1)10.()10.(21)10.1(RR21)R1(2timeat valueFuture2222=++=++=++=+=4-6Future Value of One Dollar Received at Time 0N = Number of periodsI/YR = Interest ratePMT = 0FV = ?PV = -14-7Time Line321PV1=3)R1(1+2)R1(1+1)R1(1+PV2=PV3=Present Value4-8Present Value of One DollarN = Number of periodsI/YR = Interest ratePMT = 0FV = 1PV = -Price4-9Present Value of $11 0.9901 0.9804 0.9709 0.9615 0.9524 0.9434 0.9346 0.9259 0.9174 0.90912 0.9803 0.9612 0.9426 0.9246 0.9070 0.8900 0.8734 0.8573 0.8417 0.82643 0.9706 0.9423 0.9151 0.8890 0.8638 0.8396 0.8163 0.7938 0.7722 0.75134 0.9610 0.9238 0.8885 0.8548 0.8227 0.7921 0.7629 0.7350 0.7084 0.68305 0.9515 0.9057 0.8626 0.8219 0.7835 0.7473 0.7130 0.6806 0.6499 0.62096 0.9420 0.8880 0.8375 0.7903 0.7462 0.7050 0.6663 0.6302 0.5963 0.56457 0.9327 0.8706 0.8131 0.7599 0.7107 0.6651 0.6227 0.5835 0.5470 0.51328 0.9235 0.8535 0.7894 0.7307 0.6768 0.6274 0.5820 0.5403 0.5019 0.46659 0.9143 0.8368 0.7664 0.7026 0.6446 0.5919 0.5439 0.5002 0.4604 0.424110 0.9053 0.8203 0.7441 0.6756 0.6139 0.5584 0.5083 0.4632 0.4224 0.38551%2% 3% 4% 5% 6% 7% 8% 9% 10%4-10AnnuitiesSuppose that there is an annuity of 1 dollar at each future point in time.321$1Time. . .n. . .$1$1$14-11In the case of an annuity for 2 periods, the present value is.74.1$)10.1(110.11)R1(1R11luePresent Va22=+=+++=4-12n2)R1(1)R1(1R11PVAannuityofvaluePresent++++++==.ntimeat$1PV2timeat$1PV1timeat$1PV+++=.)R1(11R1PVAn+-=4-13Present Value of a 1 Dollar AnnuityN = Number of periodsI/YR = Interest ratePMT = 1FV = 0PV = ?4-14Present Value of an Annuity of $11 0.9901 0.9804 0.9709 0.9615 0.9524 0.9434 0.9346 0.9259 0.9174 0.90912 1.9704 1.9416 1.9135 1.8861 1.8594 1.8334 1.8080 1.7833 1.7591 1.73553 2.9410 2.8839 2.8286 2.7751 2.7232 2.6730 2.6243 2.5771 2.5313 2.48694 3.9020 3.8077 3.7171 3.6299 3.5460 3.4651 3.3872 3.3121 3.2397 3.16885 4.8534 4.7135 4.5797 4.4518 4.3295 4.2124 4.1002 3.9927 3.8897 3.79085 4....
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This note was uploaded on 06/07/2011 for the course FIN 4243 taught by Professor Dudley during the Spring '08 term at University of Florida.

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CH04 - 4-1Chapter 4Time Value of Money4-2Example of a Time LinePoints in -3Time Line1 R1111.10Flat Term Structure—One Period4-4Time Line1 R211(1

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