Time Value of Money. Why do we need TVM? $ now does not equal $ later Why? – Inflation – Purchasing power.

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Presentation transcript:

Time Value of Money

Why do we need TVM? $ now does not equal $ later Why? – Inflation – Purchasing power

Key Variables in TVM PV FV I PMT N

Basic Examples What is the basic formula for PV? Example #1 Example #2

Annuities What is an annuity? How do we solve for an annuity?

Uneven Cash Flow Stream How do you find the PV of a stream of cash flows that are not equal (i.e. each CF is different)?

Amortization Building an amortization table is a four step process – Step 1 – Step 2 – Step 3 – Step 4 Repeat steps 2-4 for each row on the table

Things to Remember Interest rates are always assumed to be quoted…? Signs in the calculator Time frequency of I, PMT, N

Additional Topics ?

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