Professional Documents
Culture Documents
Pdf-Time-Value-Of-Money Yow
Pdf-Time-Value-Of-Money Yow
1
17/03/2024
2
17/03/2024
3
17/03/2024
INTEREST
4
17/03/2024
9
To find the future value (maturity value)
FV = P + I or FV = PV(1 + rt) or F = (1+ )n
P = (1+ )− or PV = FV / (1 + i)n
FV = PV(1+ RT)
20,000((1+.05(3))
20,000(1+.15)
20,000(1.15)
FV= 23,000.00
5
17/03/2024
11
P = FV / 1+RT I = FV – PV
1,537.50 / 1+.025 1,537.50 – 1,500.00
1,537.5 / 1.025 37.50
1,500.00
12
t = I / Pr
= 3,200.00 / 20,000(.08)
= 2 years
6
17/03/2024
13
I = FV – PV r = I / PV(t)
= 27,625.00 – 25,000.00 = 2,625.00 / 25,000(1.5)
= 2,625.00 = .07 or 7%
7
17/03/2024
EXAMPLES:
Linda would like to buy a car two years from now using the
proceeds of a 20% investment that is compounded semi-
annually. If the projected price of the car is ₱ 1,400,000, how
much money must be invested today to earn the price of the
car?
EXAMPLES:
You want to save for your child’s college
education and you estimate that you will
need P100,000 in 18 years. If you can earn
an annual interest rate of 5%, how much
money do you need to invest today?
PV = FV / (1+i)n
= 100,000 / (1 + .05 ) 18
= 100,000 / 2.4066
= 41,552
8
17/03/2024
EXAMPLES:
Linda would like to buy a car two years from now using the
proceeds of a 20% investment that is compounded semi-
annually. If the projected price of the car is ₱ 1,400,000, how
much money must be invested today to earn the price of the
car?
18