1418 Words6 Pages

SOLVING TIME VALUE OF MONEY PROBLEMS
I. Single (Annual) Compounding Period Examples
A. Future Value (FV) of a Single Current Lump Sum Received One Period Hence FV = PV(1+i) | PV: current (or present) value | | i: a given interest rate (or rate of return) |
(If the tables are used, this is the related formula: FV = PV * FVIF Equation 2 in the Week 1 Lecture)
Example: You place $100 today in a bank deposit account that pays 10% annual interest. In other words, interest on your $100 worth of principal is paid once a year and will be received one year from today. What will your deposit account be a year from today?
Algebraically, the relationship is:
FV = $100(1.1) = $110
Using Excel, try entering the following formula*…show more content…*

Algebraically: PV = $100/[1 + .1/2)]2x1 = $100/[1 + .1/2)]2 = $90.70 Using Excel, entering the following formula in a single spreadsheet cell will result in a value of 90.70: =100/(1+(.1/2))^2 Now, let's extend the process just described into a multi-period context. If you are to amass $100 five years from today, you wish to know the amount of funds you would need to place in a bank account today. The account pays 10% annual interest, with this interest compounded semi-annually. Algebraically: PV = $100/[1 + .1/2)]2x5 = $100/[1 + .1/2)]10 = $61.39 Using Excel, entering the following formula in a single spreadsheet cell will result in a value of 61.39: =100/(1+(.1/2))^10 Now, let's consider the future value counterpart of multiple compounding within a given period. The basis for this calculation involves amending the relationship previously identified. The future value of a single current lump sum one period hence is: FV = PV[1+ (i/n)]ny ; where n equals the number of compounding periods during the year and y equals the number of years. For a single year, y = 1. Suppose you want to know how much you will have in one year if today you place $100 in a bank deposit account that pays 10% annual interest, with interest compounded on a quarterly basis. In this case: FV = $100[1+ (.1/4)]4x1 = $100[1+

Algebraically: PV = $100/[1 + .1/2)]2x1 = $100/[1 + .1/2)]2 = $90.70 Using Excel, entering the following formula in a single spreadsheet cell will result in a value of 90.70: =100/(1+(.1/2))^2 Now, let's extend the process just described into a multi-period context. If you are to amass $100 five years from today, you wish to know the amount of funds you would need to place in a bank account today. The account pays 10% annual interest, with this interest compounded semi-annually. Algebraically: PV = $100/[1 + .1/2)]2x5 = $100/[1 + .1/2)]10 = $61.39 Using Excel, entering the following formula in a single spreadsheet cell will result in a value of 61.39: =100/(1+(.1/2))^10 Now, let's consider the future value counterpart of multiple compounding within a given period. The basis for this calculation involves amending the relationship previously identified. The future value of a single current lump sum one period hence is: FV = PV[1+ (i/n)]ny ; where n equals the number of compounding periods during the year and y equals the number of years. For a single year, y = 1. Suppose you want to know how much you will have in one year if today you place $100 in a bank deposit account that pays 10% annual interest, with interest compounded on a quarterly basis. In this case: FV = $100[1+ (.1/4)]4x1 = $100[1+

Related

## Homework

1062 Words | 5 PagesSchools should not give any homework to kids in elementary school. First, homework makes kids not get enough sleep and energy that they need for the next day. Especially because they probably have more school work the next day for them to do. Next, kids don’t get enough family time after school or even on weekends which is not good because kids need family time once in awhile because it normally keeps kids going when they can have fun with their families. Also, homework can cause mental issues which

## Homework Should Not Have Homework

998 Words | 4 PagesSchools should not give any homework. First, homework makes kids not get enough sleep and energy for the next day. Next, Kids don’t get enough family time after school or even on weekends. Also, homework can cause mental issues which can be bad for their health. Additionally, a lot of other people also agree with me about the no homework policy. One reason we shouldn’t have homework is because kids don’t get enough sleep for the next day. “We really want the kids to go home at 4 o’clock, tired.

## Homework Is Too Much Homework

743 Words | 3 Pagesdon't want to get off on a rant here, but school is giving us way too much homework and projects. We have only been in school for two months and we have had at least two projects for every core class except math, and a final 8th grade project. Everyday we wake up, go to school, and come home, easy right? No, everyday that we come home from school we have homework. Each class gives us at least 30 minutes worth of homework. 6 classes a day times 30 minutes is 180 minutes, which is 3 hours. We also

## Homework Is No Homework

768 Words | 4 PagesIn recent years, the argument over assigning students tremendous amounts of homework each night continues to grow. In a few districts scattered across the country, superintendents refuse to allow teachers to assign homework to children. The superintendent of Marion County Public Schools in Florida recently assigned a “no homework” policy for the current school year, joining districts in Massachusetts and Vermont. Most parents and students across the country admired the district's decision and hoped

## Homework Too Much Homework Essay

768 Words | 4 PagesTeachers all over the world assign hours of homework each night even though it has actually been proven that “no studies have been demonstrated that there is an academic benefit to assigning homework” so how come teachers continue to pile loads of homework onto the plates of students who already have busy schedules. Teachers assign too much homework. Kids shouldn't have to spend hours of their time on busy work. When teachers assign excessive amounts of homework students stress levels tend to rise. “

## Importance Of No Homework

1070 Words | 5 Pagespolicy of no homework. The policy encourages children to spend their free time with their family. The only “homework” that a child is given is the material that they did not finish during class time. This leads to the question. Should elementary schools assign homework to children? Children in elementary schools should not be assigned homework because children are now allowed to pursue interests and spend time with their family, homework is often repetitive and time consuming, and homework can leave

## Eassy On Homework

1151 Words | 5 PagesHomework was an essential feature of my own life whilst growing up. If memory serves me correct, the practice was always considered important and was enforced throughout grade school by both my teachers and parents. I remember coming home from school in second grade and completing a thick booklet of blank, squared pages that required me to print my numbers out from 1-1000. I sat at the kitchen table to complete it, with all seven of my family members conversing around me, as I was a child that lacked

## Cause Of Homework

1481 Words | 6 PagesIs homework more trouble than it is worth? Many students would say it is. Often times, students will work on homework for several hours a day and produce no results. Whether it is in tests, quizzes, or real life situations, improvement does not always show in the results. In fact, homework can cause many different problems. Teachers should stop assigning homework so students will not feel as stressed about school, will have more time to do activities, will have less strain in their relationships

## Homework Problems

1606 Words | 7 PagesHomework is the origin of problems within students, so reducing it to one page of work per class or at most the equivalence of twenty pages of reading a night will improve their overall well being and performance at school. Teachers appoint hours of work at night, which most students do not have the time to accomplish, especially when they want to have a gregarious life outside of school. These problems were well known to Maria, a student in tenth grade. Her normal day consisted of waking up at six

## Benefit Of Homework

800 Words | 4 PagesHomework is often seen as a useful study tool, however it can cause more problems than solve them. Homework adds to the already harrowing task of keeping up with grades, you have to worry about completing classwork as well as studying for upcoming tests or projects for six classes, even seven, if you have a 0 period. Homework adds stress, prevents students from pursuing their interests, can cause them not to give their full attention to everything they should, makes keeping up with a social life

### Homework

1062 Words | 5 Pages### Homework Should Not Have Homework

998 Words | 4 Pages### Homework Is Too Much Homework

743 Words | 3 Pages### Homework Is No Homework

768 Words | 4 Pages### Homework Too Much Homework Essay

768 Words | 4 Pages### Importance Of No Homework

1070 Words | 5 Pages### Eassy On Homework

1151 Words | 5 Pages### Cause Of Homework

1481 Words | 6 Pages### Homework Problems

1606 Words | 7 Pages### Benefit Of Homework

800 Words | 4 Pages