Management and Organizational Studies 2310A/B Chapter Notes - Chapter 6: Cash Flow, Effective Interest Rate, Annual Percentage Rate

• School: Western University
• Department: Management and Organizational Studies
• Course: Management and Organizational Studies 2310A/B
• Professor: Nicholas Kahnert

Document Summary

6. 1| future and present values of multiple cash flows. Suppose you deposit today and paying 8%, one year it will be worth and in two years it will be worth x 1. 08 = . 64. When calculating the fb of the two deposits, simply calculate balance as of beginning of each year and then roll that am9unt forward to the next year. Quicker way, first is on deposit for two years at 8% so; x 1. 082 = x. Second is on deposit for one year at 8%; x 1. 08 = . Total fv is equal to the sum of two fv; . 64 + = . 64. Suppose you need ,000 in one year and ,000 more in two years. Pv of ,000 in two at 9%; ,000/1. 092 =,683. 36. Pv of ,000 in on year; ,000/1. 09 = . 43. Total pv; . 36 + . 43 = ,600. 79.