THE TIME VALUE OF MONEY by Richard A. DeFusco‚ CFA‚ Dennis W. McLeavey‚ CFA‚ Jerald E. Pinto‚ CFA‚ and David E. Runkle‚ CFA LEARNING OUTCOMES INTRODUCTION 1 As individuals‚ we often face decisions that involve saving money for a future use‚ or borrowing money for current consumption. We then need to determine the amount we need to invest‚ if we are saving‚ or the cost of borrowing‚ if we are shopping for a loan. As investment analysts‚ much of our work also involves evaluating transactions
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Time Value of Money Exercise 1. If you invest $1000 today at an interest rate of 10% per year‚ how much will you have 20 years from now‚ assuming no withdrawals in interim? 2. a. If you invest $100 every year from the next 20 years starting one year from today and you earn interest of 10% per year‚ how much will you have at the end of the 20 years? b. How much must you invest each year if you want to have $50000 at the end of the 20 years? 3. What is the present value of the following
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IS MATTER AROUND US PURE matter Pure substance Element Compound Mixture Homogenous Heterogeneous colloid Suspension True solution MATTER Everything in the Universe is made up of MATTER PURE SUBSTANCE The substance which contains same kind of Atom or Molecule i] element A pure substance which contain same kind of Atom ii] compound A pure substance which contain same kind of Atom or Molecule but made up of different Atoms through a Chemical bound Mixture Mixture are constitutor
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wavelength than red light Flame tests are used to identify the presence of a relatively small number of metal ions in a compound. Not all metal ions give flame colours. For Group 1 compounds‚ flame tests are usually by far the easiest way of identifying which metal you have got. Flame colours are produced from the movement of the electrons in the metal ions present in the compounds. For example‚ a sodium ion in an unexcited state has the structure 1s22s22p6. When you heat it‚ the electrons gain
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Napoleon’s Buttons 1. The motivation behind each endeavor’s goals could have been the use for good‚ wealth‚ money‚ or prosperity. The chemistry of the compound is related to their usage and motive for obtaining them because molecules can control the trade and use of one specific area of the world. Some major molecules that were valued are phenol‚ isoprene‚ silk‚ cellulose‚ and glucose. Phenols were used as antiseptics during surgery to prevent cuts and wounds from getting infected. Isoprene
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soda reacts with acidic solutions‚ but not with water. Identify which of the five pure compounds is baking soda‚ and which is baking powder. Explain. Number 2 is baking soda and number 3 is baking powder. Baking soda did not react with water and baking powder did. One of our pure substances produced a characteristic color (blue-back) when it reacted with the iodine-alcohol solution. Starch is an organic compound you have probably encountered in your biology course. Identify which of the pure substances
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FINANCIAL STATEMENTS Accrual-based approach – revenues are recorded at the point of sale and costs when they are incurred‚ not necessarily when a firm receives or pays out cash Cash flow approach – used by financial professionals to focus attention on current and prospective inflows and outflows of cash 1. Balance sheet a. Assets Cash and Cash Equivalents Marketable securities Accounts receivable Inventories Net property‚ plant and equipment Intangible assets b. Liabilities Accounts
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m& Practice Questions: Time Value of Money (TVM) & Its Applications in Investments 1. Jose now has $500. How much would he have after 6 years if he leaves it invested at 5.5% with annual compounding? a. $591.09 b. $622.20 c. $654.95 d. $689.42 e. $723.89 N 6 I/YR 5.5% PV $500 PMT $0 FV $689.42 2. How much would $5‚000 due in 25 years be worth today if the discount rate were 5.5%? a. $1‚067.95 b. $1‚124.16 c. $1‚183.33 d. $1‚245.61 e. $1‚311.17
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She spends her earnings as soon as she earns any interest so she only receives interest on her initial $500 investment. Which type of interest is Sara earning? A) free market B) complex interest C) simple interest D) interest on interest E) compound interest Question 4 You are depositing $1500 in a retirement account today and expect to earn an average return of 7.5 percent on this money. How much additional income will you earn if you leave the money invested for 45 years instead of just
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Running Head: TIME VALUE OF MONEY Time Value of Money Team C: University of Phoenix MBA 503: Introduction to Finance and Accounting Time value of money is the concept that an amount of money in one ’s possession is worth more than that same amount of money promised in the future (Garrison‚ 2006). Today money can be invested to earn interest and therefore will be worth more in the future (Brealey‚ Myers‚ & Marcus‚ 2004). This paper will explain how annuities affect time value of
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