Appendix F Chapter 10-11, 7, 12 Flashcards
Simple Interest - Calculating Interest
Interest = Principal (p) * Rate (i) * Time (n)
Future Value of a SINGLE Amount
Table 1
Factor to calculate Future Value of a SINGLE Amount
Present Value (Amount initially invested) * Factor (from Table 1) = Future Value (will ALWAYS be larger than Present Value)
Future Value of Annuity
Table 2
Factor to calculate Future Value of ANNUITY
Payment (Periodic Payment Amount) * Factor (from Table 2) = Future Value (will ALWAYS be larger than present value)
Present Value of a SINGLE Amount
Table 3
Factor to calculate Present Value of a SINGLE Amount
Future Value (Future Amount to be received) * Factor from Table 3 = Present Value (Will ALWAYS be smaller than Future Value)
Present Value of ANNUITY
Table
Factor to calculate Present Value of ANNUITY
Future receipts per period * Factor from Table 4 = Present Value (Will ALWAYS be smaller future annual receipts * n)
How do you calculate factor from any needed table?
Time/Periods (n) * Rate
(Number on left of table * Percentage on top of table)
Computing Present Value
- Dollar amount to be received (future amount)
- Annual interest rate (the discount rate)
- Length of time until amount is received (number of periods)
Computing Future Value of an Annuity
- Dollar amount of the period payments or receipts
- Annual interest rate
- Number of compounding periods
Computing Present Value of an Annuity
- Amount of the periodic payments receipts
- Annual interest rate (Discount rate)
- Number of periodic payments or receipts
Time Periods & Discounting - Semiannually
- Annual Rate/ 2 Semiannual Periods
- Numbers of years * 2 semiannual periods
Time periods & Discounting - Monthly
Annual rate / 12 months
Number of years * 12 months
