BU111 Lecture 16: Time Value of Money
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BU111 Full Course Notes
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Concept important to leases, mortgages, bonds retirement. It is worth less because of risk, real interest, and inflation contributions, stock valuation, project selection. Sample question: how much money will you have in five years if you deposit. How much do you have to deposit today to have after one year (assuming 4% interest compounded annually?) Or what is the present value of to be received in one year (assume 4% discount rate) r = 0. 04. How much do you have to deposit today to have after thee years? (assuming 4% interest compounded annually?) Or what is the present value of to be received in three years (assume 4% discount rate) r = 0. 04. Sample question: how much do you have to deposit today to have four years from now (assume 5% discount rate)? r = 0. 05. Multiple but equal payments over equal periods of time.
