Presentation on theme: "Laurence Booth Sean Cleary. LEARNING OBJECTIVES Time Value of Money 5 5.1 Explain the importance of the time value of money and how it is related to an."— Presentation transcript:
LEARNING OBJECTIVES Time Value of Money 5 5.1 Explain the importance of the time value of money and how it is related to an investors opportunity costs. 5.2 Define simple interest and explain how it works. 5.3 Define compound interest and explain how it works. 5.4 Differentiate between an ordinary annuity and an annuity due, and explain how special constant payment problems can be valued as annuities and, in special cases, as perpetuities. 5.5 Differentiate between quoted rates and effective rates, and explain how quoted rates can be converted to effective rates. 5.6 Apply annuity formulas to value loans and mortgages and set up an amortization schedule. 5.7 Solve a basic retirement problem. 5.8 Estimate the present value of growing perpetuities and annuities.