AAEC 2104, Week 4 Notes
AAEC 2104, Week 4 Notes AAEC 2104
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This 1 page Class Notes was uploaded by Mara DePena on Saturday February 13, 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 81 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: 02/13/16
AAEC 2104 CHAPTER 3: THE TIME VALUE OF MONEY $1 today is worth more than $1 in the future o 3 main reasons: Risk You may not receive that $1 in the future Inflation Increase in the general price level Opportunity cost You can do things with that $1 today TIME VALUE PROBLEMS Future value (lump sum) Present value (lump sum) Annuities and loan payments Future value of annuities o Annuity- constant payment over a period of time o Dollars/year or dollars/month Present value of annuities Perpetuities-constant stream of payments, forever SECRETS TO TIME VALUE Lump sum- Only 1 cash flow, a one-time event Annuity- Series of cash flows Present value (PV)- What it is worth today Future value (FV)- What it will be worth in the future Rule of 72- Estimates how long it takes your money to double. Take the number 72 and divide it by the rate of return. TIME VALUE IN A TI-84 CALCULATOR Apps -> finance -> tVM calculator -> alpha -> enter (solve) N=total number of periods I=rate of return PV=how much you are investing today (present value) PMT=payment FV=future value
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