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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
