Lessons-TVM-71-2400

Lessons-TVM-71-2400 - Finance 2400 Lecture Notes for Fall...

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Finance 2400 Lecture Notes for Fall 2011 V.71 of Bite-size Lectures on the Time Value of Money (TVM) and the discounting of future cash flows. © Sven Thommesen 2011 Last updated: 2011-09-05 Generated: 2011-09-07
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2 © Sven Thommesen 2011 Lectures on the time value of money (TVM) and the discounting of future cash flows We live in a modern economy based on the use of money, in which specialization and the division of labor play a large role. Also playing a large role are the financial markets, in which people borrow and lend money in a large variety of financial transactions. One common feature of all financial transactions is that he who borrows money (whatever form the loan takes) expects to have to pay interest to the lender. Correspondingly, the lender expects to be able to earn interest on sums lent. Sometimes, to the lender, the transaction looks not so much like a loan as like an investment, where he purchases some kind of financial asset , holds it for a while, and then sells it. He will still expect to be able to earn some rate of return or yield on his investment. The following lectures give an introduction to simple financial theory (the time value of money and discounting) and the math used. They are called “bite-size” (a) because each lecture is small (most are limited to one page), and (b) because you are supposed to “chew” each lesson thoroughly before going on to the next one, in order to digest it properly ;) These lectures should be read in conjunction with lectures explaining the use of your specific financial calculator to solve practical problems. There is also a set of problems with worked-out solutions which you can use to test your understanding of the material. (The chapter references in blue refer to Ross, Westerfield and Jordan, Fundamentals of Corporate Finance, 9/e.)
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3 V.71 TVM LECTURES: TABLE OF CONTENTS I: SIMPLE LOANS AND SIMPLE INTEREST Lecture 101: Simple Loans, Simple Interest Lecture 102: Simple Interest: calculating FV Lecture 103: Simple Interest: calculating PV [m] Lecture 104: Simple Interest: solving for INT and N [m] II: (3610) SIMPLE LOANS AND COMPOUND INTEREST Lecture 111: Simple Loans, Compound Interest 5.1 Lecture 112: Compound Interest: calculating FV 5.2 Lecture 113: Compound Interest: calculating PV [m] 5.3 Lecture 114: Compound Interest: calculating INT and N [m] 5.3 Lecture 115: Compound Interest: The Rule of 72 [m] III: PROBLEM SOLVING: SIMPLE LOANS Lecture 121: Different ways to solve simple loan problems Lecture 122: Solving simple loan problems using tables Lecture 123: Solving simple loan problems using a financial calculator VI: (3610) PROJECTS WITH MULTIPLE EVEN CASH FLOWS: ANNUITIES 6.1 Lecture 201: Cash Flows and Projects 6.2 Lecture 202: FV and PV for multiple cash flows: manual calculations [m] 6.1 Lecture 203: Even cash flows: Annuities VII: PROBLEM SOLVING: ANNUITIES Lecture 211: Different ways to solve annuity problems 6.2 Lecture 212: Solving annuity problems using formulas 6.2 Lecture 213: Solving annuity problems using tables 6.2 Lecture 214: Solving annuity problems using a financial calculator 6.2 Lecture 215: Normal Annuities vs. Annuities Due Lecture 216: Amortization
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Lessons-TVM-71-2400 - Finance 2400 Lecture Notes for Fall...

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