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by: Naya Rhodes

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# Business Finance, Week 5, Chapter 5 13912

Marketplace > Kent State University > Finance > 13912 > Business Finance Week 5 Chapter 5
Naya Rhodes
KSU
GPA 3.4

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These will be the last bit of notes before the exam!
COURSE
PROF.
Daniel Fashimpaur
TYPE
Class Notes
PAGES
1
WORDS
CONCEPTS
KARMA
25 ?

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This 1 page Class Notes was uploaded by Naya Rhodes on Thursday September 29, 2016. The Class Notes belongs to 13912 at Kent State University taught by Daniel Fashimpaur in Fall 2016. Since its upload, it has received 3 views. For similar materials see Business Finance in Finance at Kent State University.

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Date Created: 09/29/16
BusinessFinance Chapter5:DiscountedCashFlowValuation -ComputationalmethodsformultiplecashflowsincludetimevalueofmoneyorTVMformulas,TIBAII+ calculator,andexcelspreadsheet/functions. -Anannuityisafiniteseriesofequalpaymentsthatoccuratregularintervals.Ifthefirstpaymentisattheendof theperiod,thenitisconsideredanannuityimmediateoranordinaryannuity.Ifthefirstpaymentisatthe beginningoftheyear,thenitisconsideredanannuitydue.Aperpetuityisaninfiniteseriesofequalpayments. Whencomputingonyourcalculator,ifBGNorBeginisinthedisplay,thenyourcalculatorissettoannuitydue. ToswitchfromBGN,press2 BGN,whichisabovethePMTbutton.Mostproblemsareordinaryannuities. 1 1−(1+????)???? ???????????? Annuity:???????? = ???????????? [ ???? ] Perpetuity:???????? = ???? 1+???? −1 ???????? = ????????????[ ] ???? -Interestratesneedtomatchthetimeperiod.Annualperiodsrequireannualratesandmonthlyperiodsrequire monthlyrates.Cashinflowsarepositiveandoutflowsarenegative. -Effectiveannualrate(EAR)istheinterestratecompoundedonceayear.It’susedtocomparealternative investmentswithvariouscompoundingperiods.Annualpercentagerateornominalrateistheannualratequoted bylaw. APR=periodicrate*numberofperiodsperyear ???? EAR=[1 + ???????????? ] − 1,whereAPRisthequotedrateandmisthenumberof compoundsperyear. ???? -Treasurybillsareexamplesofpurediscountloans.Theprincipalamountisrepaidatafuturedateandthereare` noperiodicinterestpayments. -Amortizedloanswithfixedpayments:Eachpaymentcoversinterestexpenseinadditiontoreducingtheprincipal. Interestpaid=Begbalance*Rate Principalpaid=TotalPayment–Interestpaid Endbalance=Begbalance–Principalpaid

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