TIME VALUE OF MONEY

TIME VALUE OF MONEY

COMPOUNDING

Determining the future value of present money

TIME VALUE OF MONEY

DISCOUNTING

Determining the present value of future money

Single Payment Compound Amount

SPCA

Single Payment Compound Amount

SPCA

How much will an original deposit grow to by the end of a specified period of

time?

Single Payment Compound Amount

SPCA

What is the future value of $100 that is to be invested for 5 years at 8 % interest

compounded annually?

Single Payment Compound Amount

SPCA

Use the 8% tableN = 1.46933

$100.00 x 1.46933 = $146.93

Uniform Series Compound Amount

USCA

Uniform Series Compound Amount

USCA

What sum will a uniform series of deposits grow to at the end of a

specified period of time?

Uniform Series Compound Amount

USCA

Assume a rich uncle deposits $1,000 a year into an account for you. How much will be there in 10 years if it is invested

at 9% and compounded annually?

Uniform Series Compound Amount

USCA

Use the 9% tableN=10

$1,000 x 15.19293 = $15,192.93

Sinking Fund DepositSFD

Sinking Fund DepositSFD

What size deposits must be made in order to reach a goal at the end of a

specified period of time?

Sinking Fund DepositSFD

Assume you want to buy a new car for $10,000 in 5 years, how much do you

need to deposit each year at 10% interest so you have enough money at

that time?

Sinking Fund DepositSFD

10% tableN= 5

$10,000.00 x 0.16380 = $1,638.00

Single Payment Present Value

SPPV

Single Payment Present Value

SPPV

What is the present value of a single sum of money to be received at the end

of a specified time?

Single Payment Present Value

SPPV

You expect a gift of $2,000 to be given to you 8 years from now. What is the

present value of that $2,000.00 assuming a 7% discount rate?

Single Payment Present Value

SPPV

7% tableN= 8

2000 x .58201 = $1,164.02

Uniform Series Present Value

USPV

Uniform Series Present Value

USPV

What is the present value of a series of uniform payments over a specified

period of time?

Uniform Series Present Value

USPV

An investment is being considered that will yield $1,500.00 a year at the end of each of the next 8 years. At 7%, what is

the current value of this stream of income?

Uniform Series Present Value

USPV

7% interestn = 8

$1,500.00 x 5.97130 = $8,956.95

Capital RecoveryCR

Capital RecoveryCR

What size payments need to be made to pay back a loan over a specified period

of time?

Capital RecoveryCR

If you have a $4,000 car loan to be paid in 30 equal monthly installments at 1

percent per month, how large must the payments be?

Capital RecoveryCR

1%N = 30

$4,000 x .03875 = $155.00