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## Time Value of Money

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**Why do we need TVM?**• $ now does not equal $ later • Why? • Inflation • Purchasing power**Key Variables in TVM**• PV • FV • I • PMT • N**Basic Examples**• What is the basic formula for PV? • Example #1 • Example #2**Annuities**• What is an annuity? • How do we solve for an annuity?**Uneven Cash Flow Stream**• How do you find the PV of a stream of cash flows that are not equal (i.e. each CF is different)?**Amortization**• Building an amortization table is a four step process • Step 1 • Step 2 • Step 3 • Step 4 • Repeat steps 2-4 for each row on the table**Things to Remember**• Interest rates are always assumed to be quoted…? • Signs in the calculator • Time frequency of I, PMT, N**Additional Topics**• ? • ? • ?