投资学全英文ppt5.pptVIP

Copyright ?2014 Pearson Education, Inc. All rights reserved. 4A-* Copyright ?2014 Pearson Education, Inc. All rights reserved. 4A-* Appendix 4A The Time Value of Money The Time Value of Money Time Value of Money: as long as an opportunity exists to earn interest, the value of money is affected by the point in time when the money is received A dollar received today is worth more than a dollar received in the future The sooner you receive money from an investment, the better The sooner your money can begin earning interest, the faster it will grow Interest: The Basic Return to Savers Interest: the “rent” paid by a borrower for use of the lender’s money Simple Interest Interest is paid only on the initial deposit Compound Interest Interest is paid on the initial deposit and any interest accumulated from prior periods Interest is earned on interest More frequent compounding periods provide higher true rate of interest Compounding periods range from annually to continuously Figure 4A.1 Calculator Keys Calculating Time Value: Computers and Spreadsheets Built-in routines similar to financial calculators Values for variables are entered in individual cells on spreadsheet Cells are linked by equations programmed to calculate time values Changes in variable values automatically update time values Provides flexibility to investors Future Value: An Extension of Compounding Future Value: the amount a current deposit will grow to over a period of time when it is placed in an account paying compound interest Future Value Example: How much will $1,000 deposited into an account earning 8% compounded annually be worth in two years? Future Value: Using an Excel Spreadsheet Future Value of an Annuity Annuity: a stream of equal cash flows that occur at equal intervals over time Ordinary Annuity: an annuity where cash flows occur at the end of each period Future Value of an Annuity Example: What is the future value of $1,000 deposited at the end of each year for 8