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Time Value of Money. DayBeginning ValueEnding Value 1$0.01$0.02 2 $0.04 3 $0.08 4 $0.16 5 $0.32 6 $0.64 7 $1.28 8 $2.56 9 $5.12 10$5.12$10.24 11$10.24$20.48.

Published byJason Dwain McKenzie Modified over 9 years ago

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Presentation on theme: "Time Value of Money. DayBeginning ValueEnding Value 1$0.01$0.02 2 $0.04 3 $0.08 4 $0.16 5 $0.32 6 $0.64 7 $1.28 8 $2.56 9 $5.12 10$5.12$10.24 11$10.24$20.48."— Presentation transcript:

1 Time Value of Money

2 DayBeginning ValueEnding Value 1$0.01$0.02 2 $0.04 3 $0.08 4 $0.16 5 $0.32 6 $0.64 7 $1.28 8 $2.56 9 $5.12 10$5.12$10.24 11$10.24$20.48 12$20.48$41.00 13$41.00$82.00 14$82.00$164.00 15$164.00$328.00 16$328.00$655.00 17$655.00$1,311.00 18$1,311.00$2,621.00 19$2,621.00$5,243.00 20$5,243.00$10,486.00 21$10,486.00$20,972.00 22$20,972.00$41,943.00 23$41,943.00$83,866.00 24$83,886.00$167,772.00 25$167,772.00$335,544.00 26$335,544.00$671,089.00 27$671,089.00$1,342,177.00 28$1,342,177.00$2,684,356.00 29$2,684,356.00$5,368,711.00 30$5,368,711.00$10,737,422.00

3 Future Value of Money The value of an investment after it has been compounded with interest for a specific period of time Compound Interest is a very powerful tool in making your money work for you.

4 Ways to figure the future value of money Future value formula Future Value = P ( 1+ I ) n Where P=principle I=interest n=years Future value Table Multiply principle times factor in table Factor based on years and interest

5 FV of $5,000 in 5 years if interest is 5%? Formula method FV = Principle(1 +interest)years FV = 5,000 (1.05) 5 FV = 5,000 (1.34) FV = $6,400

6 Future Value of $5000 in 5 years if interest is 5% Table method FV = Principle X Value from table FV = $5000 X 1.28 = $6400

7 FUTURE VALUE TABLE INTEREST YEAR4%5%6%7%8%9%10%11%12%15% 11.041.051.061.071.081.091.101.111.121.15 21.081.101.121.141.171.191.211.231.251.32 31.121.161.191.231.261.301.331.371.401.52 41.171.221.261.311.361.411.461.521.571.75 51.221.281.341.401.471.541.611.691.762.01 61.271.341.421.501.591.681.771.871.972.31 71.321.411.501.611.711.831.952.082.212.66 81.371.481.591.721.851.992.142.302.483.06 91.421.551.691.842.002.172.362.562.773.52 101.481.631.791.972.162.372.592.843.114.05 151.802.082.402.763.173.644.184.785.478.14 202.192.653.213.874.665.606.738.069.6516.37 252.672.394.295.436.858.6210.8313.5917.0032.92 303.244.325.747.6110.0613.2717.4522.8929.9666.21 353.955.527.6910.6814.7920.4128.1038.5752.80133.18 404.807.0410.2914.9721.7231.4145.2665.0093.05267.86

8 Present Value of Money  The current value of an investment after it has been discounted  PV = Principle ( 1_____) ( 1 + interest) years PV of $2,000 if interest is 8% and time is 5 years PV = 2,000 (_____1____) (1 +.08)5

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