山东济学院大三金融.pdf

Key Concepts and Skills • Be able to compute the future value and/or present value of a single cash flow or series of cash flows • Be able to compute the return on an investment • Understand perpetuities and annuities • Be able to use Excel to solve time value problems Chapter Outline 1. The One-Period Case 2. The Multiperiod Case 3. Compounding Periods 4. Simplifications 5. Loan Amortization 6. What Is a Firm Worth? 4.1 The One-Period Case: Future Value • If you were to invest $10,000 at 5-percent interest for one year, your investment would grow to $10,500 $500 would be interest ($10,000 ×.05) $10,000 is the pr ipal repayment ($10,000 ×1) $10,500 is the total due. It can be calculated as: $10,500 = $10,000 ×(1.05). The total amount due at of the investment is call the Future Value (FV). 4.1 The One-Period Case: Future Value • In the one-period case, the formula for FV can be written as: FV = C ×(1 + r) 0 Where C0 is cash flow today (time zero) and r is the appropriate interest rate. Present Value • In the one-period case, the formula for PV can be written as: PV = C1 1+r • Where C1 is cash flow at date 1, and r is the appropriate interest rate. 4.1 The One-Period Cas Present Value • Th Present Value (NPV) of an investment is the present value of the expected cash flows, less the cost of the investment. • Suppose an investment that promises to pay $10,000 in one year is offered for sale for $9,500. Your interest rate is 5%. Should you buy? $10,000 NPV = -$9,500 +