Session 8 TVM3

Session 8 TVM3 - Time Value of Money3 Compounding and...

Info iconThis preview shows pages 1–9. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Time Value of Money3 Compounding and Discounting Compounding and Discounting Cash Flow Streams Cash Flow Streams 1 2 3 4 Cheetahs in Botswana Cheetahs in Botswana NCH Announcements Horizon Importsbring three pages of your notes, spreadsheets, financial statements, and financial/ plotting calculator to the testing centeropens Thurs, closes Friday 11:30 am. Questions on Horizon Imports? TVM problems are for your joy and edification they are printed in your packet right after Horizon. Next Monday is a reading quiz (BB) on Chapter 15. You may bring your spouse/fianc to class (if there is room) on Monday/Wednesday. Sample TVM Problem How much will you receive after 6 years How much will you receive after 6 years if you invest $8,000 into a savings if you invest $8,000 into a savings account at 9 percent compounded account at 9 percent compounded quarterly? quarterly? a. $13,646 a. $13,646 b. $63,289 b. $63,289 c. $9,143 c. $9,143 d. $13,417 d. $13,417 I=2.25, N=24, PV=8000; FV=? What Does Compounded Quarterly Mean? I = 9%/4 = 2.25/quarter Say PV = 100, N=4 Invest for one year, how much at end? FV = 109.31 So, we say that 9%, compounded quarterly gives an effective annual rate of 9.31%. What Does Compounded Monthly Mean? I = 9%/12 = 0.75/month Say PV = 100, N=12 Invest for one year, how much at end? FV = 109.38 So, we say that 9%, compounded monthly gives an effective annual rate of 9.38%. What Does Compounded Daily Mean? I = 9%/365 = 0.024658/day Say PV = 100, N=365 Invest for one year, how much at end? FV = 109.42 So, we say that 9%, compounded daily gives an effective annual rate of 9.42%. Sample TVM Problem You bought a race horse which has a winning You bought a race horse which has a winning streak for four years, bringing in $500,000 per streak for four years, bringing in $500,000 per year before dying of a heart attack. If you paid year before dying of a heart attack. If you paid $1,518,675 for the horse 4 years ago, what was $1,518,675 for the horse 4 years ago, what was your annual return over this 4 year period? your annual return over this 4 year period? (round to nearest whole percent) (round to nearest whole percent) a. 8% a. 8%a....
View Full Document

This note was uploaded on 04/05/2012 for the course BUS M 301 taught by Professor Jimbrau during the Fall '11 term at BYU.

Page1 / 25

Session 8 TVM3 - Time Value of Money3 Compounding and...

This preview shows document pages 1 - 9. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online