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
Annuities
- An annuity is an equal, annual series of cash flows.
- Example:
- Annual deposits of $100 deposited at end of year earning 5% interest for three years <br />Year 1: $100 = $100<br />Year 2: $100 × .05 = $5.00 + $100 + $100 = $205<br />Year 3: $205 × .05 = $10.25 + $205 + $100 = $315.25<br />