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## TIME VALUE OF MONEY

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**TIME VALUE OF MONEY**COMPOUNDING Determining the future value of present money**TIME VALUE OF MONEY**DISCOUNTING Determining the present value of future money**Single Payment Compound Amount**SPCA How much will an original deposit grow to by the end of a specified period of time?**Single Payment Compound Amount**SPCA What is the future value of $100 that is to be invested for 5 years at 8 % interest compounded annually?**Single Payment Compound Amount**SPCA Use the 8% table N = 1.46933 $100.00 x 1.46933 = $146.93**Uniform Series Compound Amount**USCA What sum will a uniform series of deposits grow to at the end of a specified period of time?**Uniform Series Compound Amount**USCA Assume a rich uncle deposits $1,000 a year into an account for you. How much will be there in 10 years if it is invested at 9% and compounded annually?**Uniform Series Compound Amount**USCA Use the 9% table N=10 $1,000 x 15.19293 = $15,192.93**Sinking Fund Deposit**SFD What size deposits must be made in order to reach a goal at the end of a specified period of time?**Sinking Fund Deposit**SFD Assume you want to buy a new car for $10,000 in 5 years, how much do you need to deposit each year at 10% interest so you have enough money at that time?**Sinking Fund Deposit**SFD 10% table N= 5 $10,000.00 x 0.16380 = $1,638.00**Single Payment Present Value**SPPV What is the present value of a single sum of money to be received at the end of a specified time?**Single Payment Present Value**SPPV You expect a gift of $2,000 to be given to you 8 years from now. What is the present value of that $2,000.00 assuming a 7% discount rate?**Single Payment Present Value**SPPV 7% table N= 8 2000 x .58201 = $1,164.02**Uniform Series Present Value**USPV What is the present value of a series of uniform payments over a specified period of time?**Uniform Series Present Value**USPV An investment is being considered that will yield $1,500.00 a year at the end of each of the next 8 years. At 7%, what is the current value of this stream of income?**Uniform Series Present Value**USPV 7% interest n = 8 $1,500.00 x 5.97130 = $8,956.95**Capital Recovery**CR What size payments need to be made to pay back a loan over a specified period of time?**Capital Recovery**CR If you have a $4,000 car loan to be paid in 30 equal monthly installments at 1 percent per month, how large must the payments be?**Capital Recovery**CR 1% N = 30 $4,000 x .03875 = $155.00