FIN 300 Chapter Notes - Chapter 5: Investment, Interest
Document Summary
Fin 300 chapter 5: introduction to valuation: the time value of money. Future value the amount an investment is worth after one or more periods. Also compound value: the amount of money an investment would grow over some length of time at some given interest rate. If you invest for one period at an interest rate, r, your investment grows to (1 + r) per dollar invested. Compounding the process of accumulating interest in an investment over time to earn more interest: leaving your money and any accumulated interest in an investment for more than one period, thereby reinvesting the interest is compounding. Interest on interest interest earned on the reinvestment of previous interest payments. Compound interest interest earned on both the initial principal and the interest reinvested from prior periods. Simple interest interest earned only on the original principal amount invested.
