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Published byAlexandra Harrell Modified over 8 years ago
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1 第三章 資本在時間上的配置 Capital Allocation over Time
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2 分配原則: ( Principles of Allocation )
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3 Effect of the rate of return (i) :
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4 Time Value of Money : $100 today or a year later ? today is better ∵ uncertainty alternative uses, inflation
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5 Mathematics of Compound Interest Simple interest : S = s . (1 + i . n) i: interest Compound interest : interest is paid more than once (interests add to principal) S = s . (1 + i ) n (s . Table 1) Present Value (PV) Future Value (FV) ….. FV . Table 2 ….. PV . Table 1 i: discount rate = (riskless equity return + inflation rate + risk premium)
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6 Mathematics of Compound Interest (續) The present value of a sequence of annual incomes : if n →∞ and FV constant (annuity) if FV constant but n → ∞ annuity FV = PV . Table 3 or FV = PV / Table 4 PV = FV / Table 3 or PV = FV . Table 4
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13 Application of the Time Value of Money Bond valuation : (p.63) Valuation of farm real estate: (p.65) end of year 0 1 2 3 4 5........………. 20 0 0 0 0 $100 $100 ….....….......$100 $1,200 Table 4 Table 2 Table 2 $100 eg : Bond face value: $1000, interest rate: 5%, time value of money: 7%, mature in 10 yrs. $1000 × 5% × 7.0236 + $1000 × 0.5083 = $859.48 ( Table 4 ) ( Table 2 )
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