FINA 210 Lecture 2: Lesson 2
25 Apr 2016
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Document Summary
The time value of money techniques enable us to compare dollars received or paid out in different time periods. This is important in making smart decisions in budgeting, investments, debt management, tax and retirement planning. Sound financial decisions are made with considerations of not only the size but also the timing of cash flows. In the past, time value calculations were performed using formulas or tables derived from them. The development of technology and the advent of electronic calculators have made the calculations of time value easier. Inn this lesson, we will discuss nominal and effective rates and we will solve the problems using formulas and the financial calculator to find present value (pv), Future value (fv), and present value of an annuity (pva) and future value of an annuity (fva). The nominal rate is also known as in name only because it has not been adjusted for inflation.
