Time Value of Money Flashcards
1
Q
Investment
A
These are the returns you get from an investment this can be
Interest
Dividends
Rent
Capital Gains
Return % = (New Price - Original Price) / Original Price x 100
The lower the initial price the higher the return
The higher the initial price the lower the return
2
Q
Time Value of Money
A
This is summarised as money received today is worth more than a dollar received tomorrow
Businesses will need to take the money received today to bring more to the business tomorrow. Businesses tend to buy assets
3
Q
Compound Interest
A
PV x r = Interest
Principal x Interest Rate = interest
FV^n = PV x (1 + r)^n
4
Q
Annuities
A
These are finite payments that are equal in size and spaced out evenly
5
Q
Annuity Due
A
This is when the payments are made in advanced
