BA 323|71 Questions with 100% Correct Answers | Verified | Latest Update
time value of money - ️️Adjusting the value of cash flows based on when the cash flows are received. Future Value - ️️the amount of money in the future that an amount of money today will yield, given prevailing interest rates Present Value - ️️The value today of a future cash flow or series of cash flows Compounding - ️️The arithmetic process of determining the final value of a cash flow or series of cash flows when compound interest is applied Know how to solve for the future value, present value, the interest rate, or time. - ️️FVn = PV(1+ I)^n N: Time / Number of years, I: Interest rate per year • Aside: use annual compounding §PV, FV: • Amount of Money Starting With (PV) or Ending With (FV) Value of an annuity - ️️the sum of all deposits plus all interest paid. KEY POINT: • To solve, we use PMT and set either Future value or present value to zero Understand how different compounding periods impact cash flows (which compounding period would you prefer?) - ️️Daily! Interest on interest! bond - ️️A long-term debt instrument in which a borrower agrees to make payments of principal and interest, on specific dates, to the holders of the bond.
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