Bài giảng Financial Accounting - Appendix C: Time Value of Money

Time Value of MoneyAppendix CLearning ObjectivesContrast simple and compound interestCalculate the future value and present value of a single amountCalculate the future value and present value of an annuityApp C-2Time Value of MoneyDecrease in value of money due to passage of timeEssential in solving many business decisionsApp C-3Learning Objective 1Contrast simple and compound interestApp C-4Simple versus Compound InterestSimple interest: interest earned on the initial investment onlyCompound interest: interest earned on the initial investment and on previous interestApp C-5Learning Objective 2Calculate the future value and present value of a single amountApp C-6Illustration C.3—Future Value of aSingle AmountFV = future value of the invested amount, I = initial investment, i = interest rate, n = number of compounding periodsFV = I (1 + i)nApp C-7Illustration C.7—Present Value of a Single AmountPV =(1 + i)nFVApp C-8Learning Objective 3Calculate the future value and present value of an annuityApp C-9Time Value of an AnnuityFor a series of receipts and payments of cashAnnuity: Cash payments of equal amounts over equal time intervalsApp C-10Illustration C.11—Future Value of anAnnuityApp C-11Illustration C.15—Present Value of an AnnuityApp C-12End of Chapter Appendix CApp C-13