Finance Seminar 2 - Finance MT217 Jan Clark 10/04/2011 The...

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Finance MT217 Jan Clark 10/04/2011
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The variables are labeled PV, FV, r, n, and PMT. If we know the values of all these variables except one, we can solve for the value of the unknown variable. In many situations, we need to solve for either r or n. If you know PV, FV, and n, but you do not know r, the interest rate that you will earn on your investment, use the financial calculator, enter the known values into the appropriate locations—N, PV, PMT, and FV and then solve for the unknown value. The future value (FV) of an amount invested today (PV) is based on the multiple by which the initial investment will increase in the future, (1 r) n. As you can see, this multiple depends on both the interest rate (r) and the length of time (n) interest is earned, (1r) n; it is greater when r (interest rate) is higher, when n (investment time period) is greater, or when both conditions exist. To get the lump sum using a scientific calculator would be as follows: N
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Finance Seminar 2 - Finance MT217 Jan Clark 10/04/2011 The...

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