Time Value of Money AGEC 489-689 Spring 2010. Page 60 in booklet.

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Presentation transcript:

Time Value of Money AGEC Spring 2010

Page 60 in booklet

…… Time Value of Money… Assume it is the year 2009 and you have been given the choice of a single payment of $500 paid to you ten years from now (2019) or a payment of $300 today. Which would you choose?

Page 60 in booklet

Present Value Interest Factor (PIF) Table PIF r,n = (1 + r) -n

Page 61 in booklet I would take the $300 today since it has a higher present value, given my discount rate of 6%, than $500 ten years from now.

Present Value Interest Factor (PIF) Table PIF r,n = (1 + r) -n

Page 61 in booklet

EPIF r,n = [1 – (1 / (1+ r) n )] / r Equal Payment Present Value Interest Factor (EPIF) Table

EPIF r,n = [1 – (1 / (1+ r) n )] / r Equal Payment Present Value Interest Factor (EPIF) Table

Pages in booklet

Present Value Interest Factor (PIF) Table PIF r,n = (1 + r) -n

Present Value Interest Factor (PIF) Table PIF r,n = (1 + r) -n

Page 62 in booklet

Page 63 in booklet

Pages in booklet

Page 64 in booklet

EPIF r,n = [1 – (1 / (1+ r) n )] / r Equal Payment Present Value Interest Factor (EPIF) Table

Page in booklet

EPIF r,n = [1 – (1 / (1+ r) n )] / r Equal Payment Present Value Interest Factor (EPIF) Table

Page 65 in booklet

Page in booklet Know equations 40, 44 and 45

Let’s Work Some Problems