Time Value of Money

Question 1

Effective Annual Rate

Answer 1

Taken APR and use ICONV function to convert (12 for monthly compounding)

Question 2

Leases

Answer 2

Interest not compounded, payments start at beginning of period. If equipment is leased, pv is positive and pmt/fv are negative (negative for fv if money owed at the end)

Question 3

Savings For Retirement

Answer 3

Account for inflation (if needed to convert to future dollars), set calculator in begin mode for calculating required retirement income. revert back to normal mode when calculating required savings rate

Question 4

Amortization

Answer 4

P1 and P2 are only variables changed. can measure interest and principal paid on any given payments are amount of interest/principal paid over a time period

Question 5

STD Deviation Outcomes

Answer 5

68% within 1 deviation and 95% within 2

Question 6

CPP Tips

Answer 6

When calculating pv, ensure that the pv of collecting in the future is discounted to today