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Chapter 3

# Chapter 3 - Chapter 3 Chapter Objectives Calculate the...

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Chapter 3 Chapter Objectives Calculate the future value of a dollar amount that you save today Calculate the present value of a dollar amount that will be received in the future Calculate the future value of an annuity Calculate the present value of an annuity The Importance of the Time Value of Money The value of money is influenced by the time it is received The value of a given amount of money is generally greater the earlier it is received The earlier you start saving, the more quickly your money can earn interest and grow Future Value of a Single Dollar Amount Compounding: the process by which money accumulates interest To determine the future value of an amount of money you deposit today, you must know: The amount of your deposit today The interest rate to be earned on the deposit The number of years the money will be invested Future value interest factor (FVIF): a factor multiplied by today’s savings

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