Foundations and Applications of the Time Value of Money by Pamela Peterson Drake

By Pamela Peterson Drake

Entire assurance of the time price of moneyIn this booklet, authors Pamela Peterson Drake and Frank Fabozzi totally extend upon the kind of time price of cash (TVM) strategies frequently provided as a part of overviews given in different common finance books. a number of TVM options and theories are mentioned, with the authors providing many examples all through each one bankruptcy that serve to augment the instruments and methods lined. difficulties and precise solutions-demonstrated utilizing diversified monetary calculators, in addition to Excel-are additionally supplied on the finish of every bankruptcy, whereas thesaurus phrases are supplied in an appendix to familiarize you with uncomplicated terms.Provides the elemental foundations of the time price of moneyCovers concerns starting from an advent of monetary arithmetic to calculating present/future values and realizing mortgage amortizationContains problem/solution units all through, so that you can try your wisdom of the subjects discussedUnderstanding the time price of cash is vital, and this trustworthy source may also help you achieve an organization take hold of of its many elements and its real-world functions.

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If you deposit funds today in an account that pays 5% interest, compounded annually, what amount must you deposit today to reach your goal? 68 Looking at this same concept in terms of the opportunities, consider the type of problem in which you are promised a specific amount of funds at some future point in time. How much would you be willing to pay now for this investment considering what you could otherwise do with these funds in terms of investing? For example, suppose someone offered you an investment that would pay a lump sum of €10,000 five years from today.

Suppose you invest $100 for 20 years in an account that pays 2% per year, compounded quarterly. a. How much will you have in the account at the end of 20 years? b. How much interest on interest will be in the account at the end of 20 years? 5. If you deposit $100 in an account that pays 4% interest, compounded annually, what is the balance in the account at the end of three years if you withdraw only the interest on the interest each year? 6. Suppose you invest €100 today in an investment that yields 5% per year, compounded annually.

How much will you have in the account at the end of 20 years? b. How much interest on interest will be in the account at the end of 20 years? 5. If you deposit $100 in an account that pays 4% interest, compounded annually, what is the balance in the account at the end of three years if you withdraw only the interest on the interest each year? 6. Suppose you invest €100 today in an investment that yields 5% per year, compounded annually. How much will you have in the account at the end of six years?

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