3-货币的时间价值10-3.pptVIP

* * * * * * Chapter 3 Time Value of Money * Learning Objectives Compute the future value of an investment made today present value of cash to be received at some future date rate of return on an investment amount of time required for an investment to grow to a given value at a specified rate of interest * Time Value of Money Single Cash Flow FV Compounding PV Discounting Discount Rate Number of Periods * Motivation Which one will you choose? Choice A Choice B 1 HKD Paid Today 1 HKD Paid one year later * Introduction $20 today is worth more than expectation of $20 next year because: a bank would pay interest on the $20 inflation makes next year’s $20 less valuable than today’s There may be uncertainty of receiving next year’s $20 * Future Values: Example 1 Suppose you invest $1000 for one year at 5% per year. How much will you receive in one year? Interest = $1,000(.05) = $50 Value in one year = principal + interest = $1,000 + $50 = $1050 Future Value (FV) = $1,000(1 + .05) = $1,050 Suppose you leave the money in for another year. How much will you have two years from now? FV = $1,000(1.05)(1.05) = $1,000(1.05)2 = $1,102.50 * Generalizing the method Let 现值PV = present value 终值FV = future value r = period interest rate t = number of time periods of the lump sum investment; time periods can be measured in years, months or days Note that “r” should correspond to the period in question FV = PV(1 + r)t Future value interest factor FVIF(r,t) = (1 + r)t * FV Basics A dollar in hand today is worth more than a dollar promised at some future date Trade-off between money now and money later depends on Amount of PV versus FV Interest rate, r Length of time, t Time line specifies all four factors - $PV 0 1 2 n $FV 1 2 r r r r r * FV: Compounding of Interests Simple interest单利 interest is earned only on the original principal Compound interest复利 interest is earned on principal and on interest received Consider the previous example FV with