Chapter 4
Time Value of Money
Learning Goals
1.
Discuss the role of time value in finance, the use of computational aids, and the basic patterns of
cash flow.
2.
Understand the concept of future value and present value, their calculation for single...
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Chapter 4
Time Value of Money
Learning Goals
1.
Discuss the role of time value in finance, the use of computational aids, and the basic patterns of
cash flow.
2.
Understand the concept of future value and present value, their calculation for single amounts, and
the relationship between them.
3.
Find the future value and the present value of both an ordinary annuity and an annuity due, and the
present value of a perpetuity.
4.
Calculate both the future value and the present value of a mixed stream of cash flows.
5.
Understand the effect that compounding interest more frequently than annually has on future value
and the effective annual rate of interest.
6.
Describe the procedures involved in (1) determining deposits needed to accumulate to a future sum,
(2) loan amortization, (3) finding interest or growth rates, and (4) finding an unknown number of
periods.
True/False Questions
1.
Since individuals are always confronted with opportunities to earn positive rates of retu
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