# Finance Principles 215

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N, i%, PV, PMT, FV, CHS (-ve), g=BEG, g=END, CL Ch 3&4- Time Value of Money 1. –Future Value:Amount into which an investment 2. will grow after earning interest for a given period 3. of time. 4. 1. Single Cashflow: * - Compounding to FV = PV(1 + i%)n * - Discounting to PV = FV (1 + i%)- n * 2. Annuities:Series of EQUAL CFs at regular * periods/Intervals. * -Special case: Bonds/Loans(personal, business, * mortgages)/ Life insurance. * - Ordinary Annuity [OA]: Annuity with 1st CF * starting at the END of Period 1 (Compounding * Period). 0
1
3
2
PV
FV
END
Period 1
\$100 – 1st CFs
\$100
\$100

* * * * *

An investor pays equal instalments of \$100 at the end of each period for 3 years, into a savings account which yields 12% per year, compounded annually.
What is the value of the investment today?

An investor borrows \$5,000 today for 3 years at a rate of 12% per year, compounded annually.
How much are his annual repayments?

-Annuity Due[AD] : Annuity with 1st CF at the BEGINNING of Period 1. 0
1
3
2
PV- BEGINNING
FV
Period 1
\$100 – 1st CFs
\$100
\$100 PVA due = PVA ordinary x (1 +i)

An investor pays equal instalments of \$100 at the beginning of each period for 3 years, into a savings account which yields 12% per year, compounded annually. What is the value of the investment today? An investor borrows \$5,000 today for 3 years at a rate of 12% per year, compounded annually. How much are his annual repayments if his first repayment is today? FV of Annuity: [OA]:-

Deferred Annuity[...

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