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Present amount of money ________ to Future Value when it is able to earn interest
Two kinds of interest
Simple Interest:
$1000 at 5%/year for 10 years
Compound Interest
$1000 at 5%/year for 10 years
Formula for FV
Formula for PV
How do you find Discount Rate when calculating interest?
Multiple Cash Flows Calculation
$1000 today
$1200 in a year
$1400 in two years
8% interest
How much in account after 3 years?
What is an annuity
What is a perpetuity
PV of a Perpetuity Formula
PV of t-period Annuity
FV of a t-period annuity
Ordinary Annuity vs Annuity Due
PV of Growing Perpetuity
PV of Growing Annuity
Inflation: Rate at which prices as a whole are increasing
(T/F)
Nominal Interest Rate:
Rate at which money invested _________
Real Interest Rate:
Rate at which purchasing power of an investment _______________
Real Rate = Nominal - Inflation
Effective Annual Interest Rate (EAR)
Annual Percentage Rate (APR)
