Lecture_13._Cash_Flows

Lecture_13._Cash_Flows - FINANCIAL MATHEMATICS I Unit 3...

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© 2007 by Louis J. Lombardi F INANCIAL M ATHEMATICS I Unit 3: C ASH F LOWS

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U NIT 3 C ASH F LOWS T ABLE OF C ONTENTS 3.1 Example 1 Revisited. ............................................................................................................... 1 3.2 Successive Accumulated Value Formula . ............................................................................... 2 3.3 Cash Flows . ............................................................................................................................. 4 3.3.1 Cash Flows from Perspective of Lender . ................................................................... 4 3.3.2 Cash Flows from Perspective of Borrower . ............................................................... 5 3.3.3 Time Diagrams. .......................................................................................................... 5 3.4 Review Exercises. .................................................................................................................... 6 3.4.1 Key Concepts . ............................................................................................................ 6 3.4.2 Problems. .................................................................................................................... 6
NIT 3 C ASH F LOWS - 1 - 3.1 Example 1 Revisited In Example 1 in Unit 1, we assumed that on July 1, 2000 you opened a savings account with a local bank which paid interest at a compound annual rate of 10%. We also assumed that between July 1, 2000 and June 30, 2003 you made the following deposits and withdrawals, and the bank credited your account with the following interest payments: In this unit, we will study cash flows. The cash flows of an investment determine the ultimate profitability of that investment, and whether or not the objectives of both the lender and borrower are achieved. But before we study the cash flows of the above investment, we will show how the above information can be used to determine the balance in the savings account at various points in time. Date

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This note was uploaded on 06/22/2011 for the course FINANCIAL 101 taught by Professor Lagares during the Spring '11 term at FIU.

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Lecture_13._Cash_Flows - FINANCIAL MATHEMATICS I Unit 3...

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