Chapter 3 part 1
Chapter 3 part 1 AAEC 2104
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This page Class Notes was uploaded by Jennifer Cartwright on Friday February 12, 2016. The Class Notes belongs to AAEC 2104 at Virginia Polytechnic Institute and State University taught by Dr. White in Spring 2016. Since its upload, it has received 47 views. For similar materials see Personal Financial Planning in Agricultural & Resource Econ at Virginia Polytechnic Institute and State University.
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Date Created: 02/12/16
Chapter 3 part 1 Time Value of Money 0 Time Value of Money 0 1 dollar today isn t worth 1 dollar in the future 0 3 reasons I Risk 0 May not get paid I In ation 0 Price level generally increases I Opportunity cost 0 What could you do With that dollar today 0 Type of Time Value Problems 0 Future value lump sum What Will it be worth in the future 0 Present value lump sum one time deposit 0 Annuities and loan payments I Constant streams of cash ow I Regular payments 0 Future value of annuities I Future value of stream of income 0 Present value of Annuities o Perpetuities o Lump sum money changes hands only one time o The secrets of Time Value 0 Lump sum vs Annuity O I Lump sum only 1 cash ow one time event I Annuity series of cash ow FV vs PV I FV what will it be worth in the future I PV what is it worth today 0 Solving TVM Problems 0 0 Use financial calculators Use factors from book Use formulas TVM calculators online or spreadsheet 0 Using a Financial Calulator 0 Always use a positive number for PV I Amount deposited in account Always use negative for FV I Amount available to be withdrawn For PMT I Use positive for deposits I Use negative for payments Always use end for loans Use bgn for most problems
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