2 - Time Value of Money
Table of Contents
- TIME VALUE OF MONEY
- Simple Interest
- Compound Interest
- Formula for Calculating Compound Interest
- Fun Formulas
- FV Tables
- Annuities
- FV of an Annuity Tables
- Present Value
- Present Value Tables
- The Most Fun Formulas
- PV of an Annuity Tables
- Intrayear Compounding
- Intrayear Compounding (Example)
- Annuities Dues
- Perpetuity
- Perpetuity Example
- Practice
Text and Images from Slide
Simple Interest
- If someone were to receive 5% interest on a beginning value of $100, the first year they would get:
- .05 × $100 - or - $5 in interest.
- If they continued to receive 5% interest on the original $100 amount, over five years the growth in their investment would look like this:
- Year 1: 5% of $100 = $5 + $100 = $105<br />Year 2: 5% of $100 = $5 + $105 = $110<br />Year 3: 5% of $100 = $5 + $110 = $115<br />Year 4: 5% of $100 = $5 + $115 = $120<br />Year 5: 5% of $100 = $5 + $120 = $125<br />