Presentation on theme: "Future Values Present Values Annuities Rates of Return Amortization."— Presentation transcript:
Future Values Present Values Annuities Rates of Return Amortization
I % Show the time of cash flows This is only used for compounding interest Tick marks occur at the end of periods, so time 0 is today; time 1 is the end of the first year, month, ect. Or the beginning of the second period.
$100 Lump sum due in 3 years 3 year $100 ordinary annuity I % 100
After year 1: FV(1)= PV (1+I)= $100 * 1.10 = $110 After 2 years: FV(2)= PV(1+I)= $110*1.10 = 121 REPEAT THIS FOR TOTAL # OF YEARS % 100
FV: Future Values PV: Present Value N: The number of Periods I: The interest rate you are working with Pmt: Payments per year (like annuities)