fin200 week 8

# fin200 week 8 - Write a 200-300 word description of the...

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Write a 200-300 word description of the four time value of money concepts: present value, present value of annuity, future value, and future value of an annuity. Describe the characteristics of each concept and provide an example of when each would be used. Present value: The current value of one or more future cash payments, discounted at some appropriate interest rate. Present value calculations are widely used in business and economics to provide a means to compare cash flows at different times on a meaningful "like to like" basis or it can be simplified in the best way as Present value is the value of a cash flow today. Formula for the present value is: PVIF = Present Value Interest Factor = (1/ ((1+i) ^n)) Where, PV = Present value I= interest rate per compounding period n=period Like if Mr. X receive \$1,100 from Mr. Z after 1 year and the interest rate is 10%. Present value of the \$1,100 after 1 year would be PV = 1100 / (1.1^1) = \$1,000 Present value of annuity:

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## This note was uploaded on 01/05/2012 for the course 101 melissa jo taught by Professor Acc101 during the Spring '11 term at Aarhus Universitet.

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fin200 week 8 - Write a 200-300 word description of the...

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