Time Value of Money AGEC 489 689 Spring

Time Value of Money AGEC 489 -689 Spring 2010

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Time Value of Money… Assume it is the year 2009 and you have been given the choice of a single payment of $500 paid to you ten years from now (2019) or a payment of $300 today. Which would you choose? 2009 2010 2011 2012 2013 ……. 2019

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Present Value Interest Factor (PIF) Table PIFr, n = (1 + r) -n

I would take the $300 today since it has a higher present value, given my discount rate of 6%, than $500 ten years from now. Page 61 in booklet

Present Value Interest Factor (PIF) Table PIFr, n = (1 + r) -n

Page 61 in booklet

Equal Payment Present Value Interest Factor (EPIF) Table EPIFr, n = [1 – (1 / (1+ r)n)] / r

Equal Payment Present Value Interest Factor (EPIF) Table EPIFr, n = [1 – (1 / (1+ r)n)] / r

Pages 61 -62 in booklet

Present Value Interest Factor (PIF) Table PIFr, n = (1 + r) -n

Present Value Interest Factor (PIF) Table PIFr, n = (1 + r) -n

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Equal Payment Present Value Interest Factor (EPIF) Table EPIFr, n = [1 – (1 / (1+ r)n)] / r

Page 64 -65 in booklet

Equal Payment Present Value Interest Factor (EPIF) Table EPIFr, n = [1 – (1 / (1+ r)n)] / r

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Know equations 40, 44 and 45 Page 65 -66 in booklet

Let’s Work Some Problems