Академический Документы
Профессиональный Документы
Культура Документы
MONEY
FINANCIAL MANAGEMENT
• Simple Interest
• Compound Interest
TIME VALUE OF MONEY
FUTURE VALUE
Where:
FV = Future Value
PV = Present Value or Principal Value.
i = rate of interest for that period.
r = per annum interest rate.
t = time in year
TIME VALUE OF MONEY
FUTURE VALUE
John invests 1,000 for five years with an interest rate of 10%,
compounded annually.
Simple Interest :
TIME VALUE OF MONEY
PRESENT VALUE
Where:
FV = Future Value
PV = Present Value or Principal Value.
i = rate of interest for that period.
r = per annum interest rate.
t = time in year
TIME VALUE OF MONEY
PRESENT VALUE
Example:
PV = $5,000 / (1 + 0.05)6
PV = $5,000 / (1.3401)
PV = $3,731
TIME VALUE OF MONEY
DISCOUNTING AND COMPOUNDING
• Discounting
• Compounding
TIME VALUE OF MONEY
TIME VALUE OF MONEY
Perpetuities
Formulas :
or
TIME VALUE OF MONEY
PERPETUITY
Where:
PV = Present Value.
r = Discount Rate.
D = Dividend or Coupon per period.
TIME VALUE OF MONEY
PERPETUITY
Example:
PV of Perpetuity = 10/0.05
PV of Perpetuity = ₱200.00
TIME VALUE OF MONEY
Application Exercise
A man wants to invest a sum of P50,000 in two
investments. The first investment earns a rate of
interest 4 times that of the second investment. In 3
years the first investment grows to P37,200. For 10
years, the second investment grows to P24,000.
TIME VALUE OF MONEY
1. Find the sum invested in each rate of interest.
A. P35,000 and P15,000
B. P35,500 and P14,500
C. P30,000 and P20,000
D. P32,000 and P18,000
X= (37,200/(1+12(0.02))) Rx = 2%
Ry = 8%
X= 30,000
Y = (24,000/(1+10i))
Y = (24,000/(1+10(0.02)))
Y = 20,000
TIME VALUE OF MONEY
1. Find the sum invested in each rate of interest.
A. P35,000 and P15,000
B. P35,500 and P14,500
C. P30,000 and P20,000
D. P32,000 and P18,000