Date: 14/11/2012 52. Annuities: You are saving for the college education of your two children. They are two years apart in age; one will begin college 15 years from today and the other will begin 17 years from today. You estimate your children’s college expenses to be $23‚000 per year per child‚ payable at the beginning of each school year. The annual interest rate is 5.5 percent. How much money must you deposit in account each year to fund your children’s education
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Time Value of Money The time value of money (TVM) or‚ discounted present value‚ is one of the basic concepts of finance and was developed by Leonardo Fibonacci in 1202. The time value of money (TVM) is based on the premise that one will prefer to receive a certain amount of money today than the same amount in the future‚ all else equal. As a result‚ when one deposits money in a bank account‚ one demands (and earns) interest. Money received today is more valuable than money received in the future
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Chapter 3 FV = PV (1+r)t ; PV = FV * DCF Perpetuity – a stream of cash flows with fixed payments each year lasting forever. PV = C/r r = C/PV Growing Perpetuity – a perpetuity with a constant growth rate (g) ** r must be greater than g ** Annuity – a stream of cash flows with a definite end Ordinary annuity – payments at the end of the year Annuity due – payments at the beginning of the year PV of annuity due = PV of an ordinary annuity * (1+ r) Simple interest – interest earned
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FIN B280 Introduction to Financial Management │Unit 1│ Scope and Concepts © The Open University of Hong Kong Unit 1 1 FIN B280 Introduction to Financial Management Unit Overview Financial Objective of a Firm Agency Problem Time Value of Money Making interest rates comparable Effect of taxes on financial decision making © The Open University of Hong Kong Unit 1 2 FIN B280 Introduction to Financial Management Financial Objective of a Firm © The Open University of Hong
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Solutions to Textbook Recommended Problems 4-1. You have just taken out a five-year loan from a bank to buy an engagement ring. The ring costs $5000. You plan to put down $1000 and borrow $4000. You will need to make annual payments of $1000 at the end of each year. Show the timeline of the loan from your perspective. How would the timeline differ if you created it from the bank’s perspective? 0 1 2 3 4 5 4000 –1000 –1000 –1000 –1000 –1000 From the bank’s
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learn them from the owner’s manual. (There is one example of using these functions in red below.) If your calculator is showing a comma where there should be a decimal point: [GOLD] [./‚] To switch from end mode (for ordinary annuity calculations) to begin mode (for annuities due): [GOLD] [BEG/END] You want to be in END mode for most calculations. If you use begin mode‚ you MUST change back to end mode after finishing your calculations in begin mode. Time Value of Money calculations: FV of a Lump
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Financial Management Lecture 1- Introduction and Context 1Dr. Tarik Driouchi - tarik.driouchi@kcl.ac.uk Senior Lecturer- Financial & Mgt. studies Office Hours [WBW4.15]: Thursdays 4-6pm A few words on the AAFM MSc… Themes: Accounting Theory‚ Financial Accounting‚ Valuation‚ Corporate Governance‚ Financial Management & Markets‚ Behavioural Finance Structure: Taught modules (term 1 & 2) + Dissertation (term 3) KCL Keats‚ KCL e-resources and Q&As 2 Learning Objectives • Main objectives
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Faculty of Economics and Business Academic year 2013-2014 On the first page of this exam form you will find important information about this exam. Please read the information below before answering any exam questions! Exam: Financiering (6011P0122) and Finance (6011P0135) Date and time of the exam: Tuesday‚ April 22 Duration of the exam: 1 hour You have to identify yourself using your validated UvA-identification card or other legal ID-card. If you are not registered via SIS for the course
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Retirement Annuity Sunrise Industries wishes to accumulate funds to provide a retirement annuity for its vice president of research‚ Jill Moran. Ms. Moran‚ by contract‚ will retire at the end of exactly 12 years. Upon retirement‚ she is entitled to receive an annual end-of-year payment of $42‚000 for exactly 20 years. If she dies prior to the end of the 20-year period‚ the annual payments will pass to her heirs. During the 12-year “accumulation period‚” Sunrise wishes to fund the annuity by making
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Time Value of Money (TVM) Assignments: 1. Calculating Interest Rates In 2011‚ the automobile industry announced the average vehicle selling price in the United States was $28‚835. Five years earlier‚ the average price was $21‚608. What was the annual increase in vehicle selling price? *** Enter 5 N Solve for 2. I/Y 5.94% N Solve for 5.5% I/Y 80 10% I/Y Solve for $150‚000 $40‚000 PV PMT FV $1‚000‚000 PV PMT FV $488.19 Calculating Interest Rates and Future Values In 1895‚ the first
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