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Learning Objectives

4.1 Calculate future values and understand compounding.4.8 Distinguish between the different types of loan repayments: discount loans, interest-only loans, and

amortized loans

3.1 Future Value and Compouning Interest

?The time value of money (TVM) refers to a dollar in hand today being worth more than a dollar received in the future because you can invest today's dollar in an interest-bearing account that grows in value over time.4.4 Compute the future value of multiple cash flows.

Learning Objectives

4.1 Calculate future values and understand compounding.

4.2 Calculate present values and understand discounting.

4.3 Calculate implied interest rates and waiting time from the time value of money equation.

4.4 Compute the future value of multiple cash flows.

4.5 Determine the future value of an annuity.

4.6 Determine the present value of an annuity.

4.7 understand the concept of a perpetuity.

4.8 Distinguish between the different types of loan repayments: discount loans, interest-only loans, and

amortized loans

3.1 Future Value and Compouning Interest

⚫The time value of money (TVM) refers to a dollar in hand today being worth more than a dollar received in the future because you can invest today's dollar in an interest-bearing account that grows in value over time. We call this the future value (FV), the cash value of an asset (money, in this example) in the future that is equivalent in value to a specific amount today.

-(A) The Single-Period Scenario

-(B) The Multiple-Period Scenario