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chap005a

chap005a

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Published by sueern

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Published by: sueern on Jun 15, 2009
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02/03/2013

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Copyright 
 
© 2008 by The McGraw-Hill Companies, Inc. All rights reserved 
.
 McGraw-Hill/Irwin
1
Chapter 5
Discounted CashFlow Valuation
 
1-2
 
5-2
2
Chapter Outline
Future and Present Values of MultipleCash FlowsValuing Level Cash Flows: Annuitiesand Perpetuities
Comparing Rates: The Effect of Compounding Periods
Loan Types and Loan Amortization
 
1-3
 
5-3
3
Annual Percentage Rate (APR)
This is the annual rate that is quoted by lawBy definition APR = period rate times the numbersof compounding per year 
 –Monthly rate = 1% –Quarterly rate = 2%
Period rate = APR / numbers of compounding per year 
 –APR = 12% compounded monthly –APR = 10% compounded semiannually

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