财务管理英文Chapter3.pptVIP

Chapter 3 Time Value of Time Value of Money “A dollar today is worth than a dollar tomorrow.” Chapter Objectives Distinguish between simple and compound interest. Calculate the present value and future value of a single amount for both one period and multiple periods. Calculate the present value and future value of multiple cash flows. Calculate the present value and future value of annuities. Compare nominal interest rates (NIR) and effective annual interest rates (EAR). Determine the amortization schedule. Cash-Flow Time Line Time Value Terminology Future value (FV) is the amount an investment is worth after one or more periods. Present value (PV) is the current value of future cash flows of an investment. Time Value Terminology The number of time periods between the present value and the future value is represented by ‘n’ or “t”. The rate of interest for discounting or compounding is called ‘i’ or “r”. All time value questions involve包括 four values: PV, FV, i and n. Given three of them, it is always possible to calculate the fourth. Interest Rate Terminology Simple interest refers to interest earned only on the original capital investment amount. Compound interest复利 refers to interest earned on both the initial capital investment and on the interest reinvested from prior period. Future Values Example - Simple Interest Interest earned at a rate of 6% for five years on a principal balance of $100. Future Values Example - Simple Interest Interest earned at a rate of 6% for five years on a principal balance of $100. Future Values Example - Simple Interest Interest earned at a rate of 6% for five years on a principal balance of $100. Today Future Years 1 2 3 4 5 Interest Earned Value 100 Future Values Example - Simple Interest Interest earned at a rate of 6% for five years on a principal balance of $100. Today Future Years 1 2 3 4 5 Interest Earned 6 Value 100 106 Futu