Lecture notes
Finance Document Foundation for beginners
- Module
- INF
- Institution
- University Of Northampton (UoN)
Providing clearly information about finance for beginners and some quiz for everyone to practise.
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Chapter 5Formulas
Introduction to
Valuation: The
Time Value of
Money
McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.
,Key Concepts and Skills
• Be able to compute the future value of an
investment made today
• Be able to compute the present value of cash
to be received at some future date
• Be able to compute the return on an investment
• Be able to compute the number of periods that
equates a present value and a future value
given an interest rate
• Be able to use a financial calculator and/or a
spreadsheet to solve time value of money
problems
5F-2
, Chapter Outline
• Future Value and Compounding
• Present Value and Discounting
• More about Present and Future
Values
5F-3
, Basic Definitions
• Present Value – earlier money on a time
line
• Future Value – later money on a time line
• Interest rate – “exchange rate” between
earlier money and later money
– Discount rate
– Cost of capital
– Opportunity cost of capital
– Required return
5F-4
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