Ch 5- The Time value of Money 2 ◎2002, Prentice Hall. Inc
Ch. 5 - The Time Value of Money © 2002, Prentice Hall, Inc
The Time value ofmoney Compounding and Discounting Single Sums (
The Time Value of Money Compounding and Discounting Single Sums
We know that receiving SI today is worth more than Sl in the future. This is due to opportunity costs The opportunity cost of receiving SI in he future is the interest we could have earned if we had received the si sooner Today Future HE UNE AMERICA THE UNITED STATES OF AMERICA ONE DOLLAR ONE DOLLAR
We know that receiving $1 today is worth more than $1 in the future. This is due to opportunity costs. The opportunity cost of receiving $1 in the future is the interest we could have earned if we had received the $1 sooner. Today Future
If we can measure this opportunity cost, we can
If we can measure this opportunity cost, we can:
If we can measure this opportunity cost, we can Translate SI today into its equivalent in the future (compounding
If we can measure this opportunity cost, we can: • Translate $1 today into its equivalent in the future (compounding)
If we can measure this opportunity cost, we can Translate SI today into its equivalent in the future (compounding Today Future K THE UNTED STATES OF AMERICA YO L ONE DOLLAR
If we can measure this opportunity cost, we can: • Translate $1 today into its equivalent in the future (compounding). Today ? Future
If we can measure this opportunity cost, we can Translate SI today into its equivalent in the future (compounding Today Future K THE UNTED STATES OF AMERICA YO L ONE DOLLAR Translate SI in the future into its equivalent today (discounting)
If we can measure this opportunity cost, we can: • Translate $1 today into its equivalent in the future (compounding). • Translate $1 in the future into its equivalent today (discounting). Today ? Future
If we can measure this opportunity cost, we can Translate SI today into its equivalent in the future (compounding Today Future K THE UNTED STATES OF AMERICA YO L ONE DOLLAR Translate SI in the future into its equivalent today (discounting) Today Future THE UNITED STATES OF AMERICA ONE DOLLAR
If we can measure this opportunity cost, we can: • Translate $1 today into its equivalent in the future (compounding). • Translate $1 in the future into its equivalent today (discounting). ? Today Future Today ? Future
future value
Future Value
Future value -single sums Ifyou deposit $100 in an account earning 6%, how much would you have in the account after l year?
Future Value - single sums If you deposit $100 in an account earning 6%, how much would you have in the account after 1 year?
