FIN20150 Lecture 5: lecture 5 notes

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sangriacoyote110

22 Jan 2016

School

Department

Finance

Course

FIN20150

Professor

Ackermann Carl

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Document Summary

Future and present value with multiple cash flows. Present values two ways to calculate future values for multiple cash flows: (1) compound the accumulated balance forward one year at a time or (2) calculate the future value of each cash flow first and then add them up. Ex) consider the future value of ,000 invested at the end of each of the next five years. The current balance is zero, and the rate is 10 percent can either discount back one period at a time, or we can just calculate the present values individually and add them up. Ex) suppose we had an investment that was going to pay ,000 at the end of every year for the next five years. To find the present value, we could discount each ,000 back to the present separately and then add them up. Loans annuity due- annuity for which the cash flows occur at the beginning of each period.

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