# Percent, Sales Tax, & Discounts

Size: px
Start display at page:

Transcription

1 Percent, Sales Tax, & Discounts Many applications involving percent are based on the following formula: Note that of implies multiplication. Suppose that the local sales tax rate is 7.5% and you purchase a bicycle for \$894. Sales tax amount = tax rate item s cost 7.5% \$894 = \$894 = \$67.05 The tax paid is \$ Pearson Prentice Hall. All rights reserved. 1

2 Percent and Sales Price Businesses reduce prices, or discount, to attract customers and to reduce inventory. A computer with an original price of \$1460 is on sale at 15% off. a. Discount amount = discount rate original price The discount amount is \$219. Sale price = \$1460 \$219 = \$ Pearson Prentice Hall. All rights reserved. 2

3 Percent and Change If a quantity changes, its percent increase or its percent decrease can be found as follows: 1. Find the fraction for the percent increase or decrease: amount of increase original amount or amount of decrease original amount. 2. Find the percent increase or decrease by expressing the fraction in step 1 as a percent Pearson Prentice Hall. All rights reserved. 3

4 Example: Percent Change A store owner buys a calculator at a price of \$90.00 and offers it for sale at \$ What is the percentage increase from wholesale to retail price? % The calculator hasn t sold so the store owner discounts the price back to the wholesale price of \$ What is the percent discount from the retail price? %

5 Formulas: percentage rates To increase an amount by a given percentage, convert the percentage to a decimal, i, and multiply by 1 + i. For example, when \$100 increases by 8%, the resulting total is \$100 ( ) = \$ = \$108. To decrease an amount by a given percentage, use a negative value of i. For example, to discount or depreciate \$60 by 20%, multiply \$60 (1 0.20) = \$ = \$48.

6 Interest Interest is a payment made for the use of a saver s or investor s money. The rate of interest describes what proportion of the original amount or principal is paid. With simple interest, interest is paid only on the original balance. With compound interest, interest is paid on the original balance, plus any accumulated interest.

7 Example: simple vs. compound interest Suppose \$100 is deposited into a savings account with an interest rate of 6% per year. How much has accumulated after 3 years? Simple Interest Compound Interest Interest Balance Interest Balance Start \$ \$ after 1 year \$ \$ after 2 years after 3 years after 20 years

8 Simple Interest (Arithmetic Growth) A = accumulated (future) value P = principal amount (present value) r = annual rate of interest (as decimal) t = number of years A = P + Prt = P(1 + rt) The total amount of interest is I = Prt.

9 Sample Question If you deposit \$2000 at 7% simple interest, what is the balance after 2 years? A) \$ B) \$ C) \$ D) \$ A = P + Prt \$ 2000 \$ \$ A = P(1 + rt) \$2000( ) \$ \$

10 Sample Question If you borrow \$3000 and pay back \$3225 in 3 years, what rate of simple interest will you pay? I P % r 7.5% 3 2.5% per year

11 Discounted Loan The principal minus interest is loaned to the borrower. The borrower must repay the entire principal. P = principal r = annual rate of interest t = number of years P Prt = the proceeds (amount borrower receives) Example: Suppose you borrow \$9,000 on a 6% discounted loan for 18 months. What is the net amount you receive? P Prt = = = 8190

12 Compound Interest A nominal rate, r, is the stated rate of interest for a specified length of time, not taking into account whether or how often interest is compounded. Suppose interest at a nominal annual rate r is compounded n times per year. Then the rate per compounding period is i = r / n. For example, if a savings account pays 6%: compounded quarterly, then i = 0.06/4 = 0.015; compounded monthly, then i = 0.06/12=

13 Start Compound Interest (Exponential Growth) A = accumulated (total) amount P = principal (beginning) amount i = r/n = interest rate per compounding period nt = number of compounding periods Interest Balance after 1 st period P i P + Pi = P(1 + i) after 2 nd period P(1 + i) i P(1 + i) (1 + i) = P(1 + i) 2 after 3 rd period P(1 + i) 2 i P(1 + i) 2 (1 + i) = P(1 + i) after nt periods P(1 + i) nt 1 i P A = P(1 + i) nt

14 Compound Interest (Exponential Growth) A = accumulated (total) amount P = principal (beginning) amount r = nominal annual interest rate i = r/n = interest rate per compounding period nt = number of compounding periods A P(1 i) nt P 1 r n nt

15 Sample Question If you deposit \$2000 at 4% compounded quarterly, what is the balance after 2 years (to the nearest dollar)? A. \$2160 B. \$2163 C. \$2166 D. \$2167 \$20001 A P 1 r n Note: \$2160 is the amount accrued using 4% simple interest, A = P(1 + rt): \$2000( ) = \$2160 nt 42 \$2000 \$2000 \$

### 21.1 Arithmetic Growth and Simple Interest

21.1 Arithmetic Growth and Simple Interest When you open a savings account, your primary concerns are the safety and growth of your savings. Suppose you deposit \$1000 in an account that pays interest at

### Credit Card Loans. Student Worksheet

Student Worksheet Credit Card Loans Name: Recall the formula for simple interest where, I is the interest owed P is the principal amount outstanding r is the interest rate t is the time in years. Note:

### Check off these skills when you feel that you have mastered them.

Chapter Objectives Check off these skills when you feel that you have mastered them. Know the basic loan terms principal and interest. Be able to solve the simple interest formula to find the amount of

### Chapter 21: Savings Models

October 16, 2013 Last time Arithmetic Growth Simple Interest Geometric Growth Compound Interest A limit to Compounding Problems Question: I put \$1,000 dollars in a savings account with 2% nominal interest

### Chapter 22: Borrowings Models

October 21, 2013 Last Time The Consumer Price Index Real Growth The Consumer Price index The official measure of inflation is the Consumer Price Index (CPI) which is the determined by the Bureau of Labor

### E INV 1 AM 11 Name: INTEREST. There are two types of Interest : and. The formula is. I is. P is. r is. t is

E INV 1 AM 11 Name: INTEREST There are two types of Interest : and. SIMPLE INTEREST The formula is I is P is r is t is NOTE: For 8% use r =, for 12% use r =, for 2.5% use r = NOTE: For 6 months use t =

### Section 8.1. I. Percent per hundred

1 Section 8.1 I. Percent per hundred a. Fractions to Percents: 1. Write the fraction as an improper fraction 2. Divide the numerator by the denominator 3. Multiply by 100 (Move the decimal two times Right)

### 5.1 Simple and Compound Interest

5.1 Simple and Compound Interest Question 1: What is simple interest? Question 2: What is compound interest? Question 3: What is an effective interest rate? Question 4: What is continuous compound interest?

### \$496. 80. Example If you can earn 6% interest, what lump sum must be deposited now so that its value will be \$3500 after 9 months?

Simple Interest, Compound Interest, and Effective Yield Simple Interest The formula that gives the amount of simple interest (also known as add-on interest) owed on a Principal P (also known as present

### Math 120 Basic finance percent problems from prior courses (amount = % X base)

Math 120 Basic finance percent problems from prior courses (amount = % X base) 1) Given a sales tax rate of 8%, a) find the tax on an item priced at \$250, b) find the total amount due (which includes both

About Compound Interest TABLE OF CONTENTS About Compound Interest... 1 What is COMPOUND INTEREST?... 1 Interest... 1 Simple Interest... 1 Compound Interest... 1 Calculations... 3 Calculating How Much to

### 10.6 Functions - Compound Interest

10.6 Functions - Compound Interest Objective: Calculate final account balances using the formulas for compound and continuous interest. An application of exponential functions is compound interest. When

### Finite Mathematics. CHAPTER 6 Finance. Helene Payne. 6.1. Interest. savings account. bond. mortgage loan. auto loan

Finite Mathematics Helene Payne CHAPTER 6 Finance 6.1. Interest savings account bond mortgage loan auto loan Lender Borrower Interest: Fee charged by the lender to the borrower. Principal or Present Value:

### 5. Time value of money

1 Simple interest 2 5. Time value of money With simple interest, the amount earned each period is always the same: i = rp o We will review some tools for discounting cash flows. where i = interest earned

### CHAPTER 5. Interest Rates. Chapter Synopsis

CHAPTER 5 Interest Rates Chapter Synopsis 5.1 Interest Rate Quotes and Adjustments Interest rates can compound more than once per year, such as monthly or semiannually. An annual percentage rate (APR)

### The Basics of Interest Theory

Contents Preface 3 The Basics of Interest Theory 9 1 The Meaning of Interest................................... 10 2 Accumulation and Amount Functions............................ 14 3 Effective Interest

### Simple Interest. and Simple Discount

CHAPTER 1 Simple Interest and Simple Discount Learning Objectives Money is invested or borrowed in thousands of transactions every day. When an investment is cashed in or when borrowed money is repaid,

### How to calculate present values

How to calculate present values Back to the future Chapter 3 Discounted Cash Flow Analysis (Time Value of Money) Discounted Cash Flow (DCF) analysis is the foundation of valuation in corporate finance

### Chapter 2 Finance Matters

Chapter 2 Finance Matters Chapter 2 Finance Matters 2.1 Pe r c e n t s 2.2 Simple and Compound Interest 2.3 Credit Cards 2.4 Annuities and Loans Chapter Summary Chapter Review Chapter Test Handling personal

### A = P (1 + r / n) n t

Finance Formulas for College Algebra (LCU - Fall 2013) ---------------------------------------------------------------------------------------------------------------------------------- Formula 1: Amount

### Solutions to Supplementary Questions for HP Chapter 5 and Sections 1 and 2 of the Supplementary Material. i = 0.75 1 for six months.

Solutions to Supplementary Questions for HP Chapter 5 and Sections 1 and 2 of the Supplementary Material 1. a) Let P be the recommended retail price of the toy. Then the retailer may purchase the toy at

### Finance 197. Simple One-time Interest

Finance 197 Finance We have to work with money every day. While balancing your checkbook or calculating your monthly expenditures on espresso requires only arithmetic, when we start saving, planning for

### Their point of intersection is the break-even point. The graph. Loss at right represents a break-even situation.

Chapter Financial arithmetic 17 Break-even analysis The success or failure of any business enterprise can be expressed mathematically as follows: P = R C or L = C R where: P = profit made by a business

### With compound interest you earn an additional \$128.89 (\$1628.89 - \$1500).

Compound Interest Interest is the amount you receive for lending money (making an investment) or the fee you pay for borrowing money. Compound interest is interest that is calculated using both the principle

### The Institute of Chartered Accountants of India

CHAPTER 4 SIMPLE AND COMPOUND INTEREST INCLUDING ANNUITY APPLICATIONS SIMPLE AND COMPOUND INTEREST INCLUDING ANNUITY- APPLICATIONS LEARNING OBJECTIVES After studying this chapter students will be able

### LESSON SUMMARY. Mathematics for Buying, Selling, Borrowing and Investing

LESSON SUMMARY CXC CSEC MATHEMATICS UNIT Four: Consumer Arithmetic Lesson 5 Mathematics for Buying, Selling, Borrowing and Investing Textbook: Mathematics, A Complete Course by Raymond Toolsie, Volume

### Math of Finance Semester 1 Unit 2 Page 1 of 19

Math of Finance Semester 1 Unit 2 Page 1 of 19 Name: Date: Unit 2.1 Checking Accounts Use your book or the internet to find the following definitions: Account balance: Deposit: Withdrawal: Direct deposit:

### 10. Time Value of Money 2: Inflation, Real Returns, Annuities, and Amortized Loans

10. Time Value of Money 2: Inflation, Real Returns, Annuities, and Amortized Loans Introduction This chapter continues the discussion on the time value of money. In this chapter, you will learn how inflation

### Chapter 6. Discounted Cash Flow Valuation. Key Concepts and Skills. Multiple Cash Flows Future Value Example 6.1. Answer 6.1

Chapter 6 Key Concepts and Skills Be able to compute: the future value of multiple cash flows the present value of multiple cash flows the future and present value of annuities Discounted Cash Flow Valuation

### MAT116 Project 2 Chapters 8 & 9

MAT116 Project 2 Chapters 8 & 9 1 8-1: The Project In Project 1 we made a loan workout decision based only on data from three banks that had merged into one. We did not consider issues like: What was the

### SAMPLE. MODULE 4 Principles of financial mathematics

C H A P T E R 20 MODULE 4 Principles of financial mathematics How do we determine the new price when discounts or increases are applied? How do we determine the percentage discount or increase applied

### 8.1 Simple Interest and 8.2 Compound Interest

8.1 Simple Interest and 8.2 Compound Interest When you open a bank account or invest money in a bank or financial institution the bank/financial institution pays you interest for the use of your money.

### Pre-Session Review. Part 2: Mathematics of Finance

Pre-Session Review Part 2: Mathematics of Finance For this section you will need a calculator with logarithmic and exponential function keys (such as log, ln, and x y ) D. Exponential and Logarithmic Functions

### Chapter 1 The Measurement of Interest

Interest: the compensation that a borrower of capital pays to a lender of capital for its use. It can be viewed as a form of rent that the borrower pays to the lender to compensate for the loss of use

### CHAPTER 1. Compound Interest

CHAPTER 1 Compound Interest 1. Compound Interest The simplest example of interest is a loan agreement two children might make: I will lend you a dollar, but every day you keep it, you owe me one more penny.

### Lesson Plan -- Simple and Compound Interest

Lesson Plan -- Simple and Compound Interest Chapter Resources - Lesson 4-14 Simple Interest - Lesson 4-14 Simple Interest Answers - Lesson 4-15 Compound Interest - Lesson 4-15 Compound Interest Answers

### 3 More on Accumulation and Discount Functions

3 More on Accumulation and Discount Functions 3.1 Introduction In previous section, we used 1.03) # of years as the accumulation factor. This section looks at other accumulation factors, including various

### Review Page 468 #1,3,5,7,9,10

MAP4C Financial Student Checklist Topic/Goal Task Prerequisite Skills Simple & Compound Interest Video Lesson Part Video Lesson Part Worksheet (pages) Present Value Goal: I will use the present value formula

### Present Value Concepts

Present Value Concepts Present value concepts are widely used by accountants in the preparation of financial statements. In fact, under International Financial Reporting Standards (IFRS), these concepts

### Mathematics. Rosella Castellano. Rome, University of Tor Vergata

and Loans Mathematics Rome, University of Tor Vergata and Loans Future Value for Simple Interest Present Value for Simple Interest You deposit E. 1,000, called the principal or present value, into a savings

### first complete "prior knowlegde" -- to refresh knowledge of Simple and Compound Interest.

ORDINARY SIMPLE ANNUITIES first complete "prior knowlegde" -- to refresh knowledge of Simple and Compound Interest. LESSON OBJECTIVES: students will learn how to determine the Accumulated Value of Regular

### Applications of Geometric Se to Financ Content Course 4.3 & 4.4

pplications of Geometric Se to Financ Content Course 4.3 & 4.4 Name: School: pplications of Geometric Series to Finance Question 1 ER before DIRT Using one of the brochures for NTM State Savings products,

### Introduction to the Hewlett-Packard (HP) 10BII Calculator and Review of Mortgage Finance Calculations

Introduction to the Hewlett-Packard (HP) 10BII Calculator and Review of Mortgage Finance Calculations Real Estate Division Sauder School of Business University of British Columbia Introduction to the Hewlett-Packard

### MTH 150 SURVEY OF MATHEMATICS. Chapter 11 CONSUMER MATHEMATICS

Your name: Your section: MTH 150 SURVEY OF MATHEMATICS Chapter 11 CONSUMER MATHEMATICS 11.1 Percent 11.2 Personal Loans and Simple Interest 11.3 Personal Loans and Compound Interest 11.4 Installment Buying

### Finance CHAPTER OUTLINE. 5.1 Interest 5.2 Compound Interest 5.3 Annuities; Sinking Funds 5.4 Present Value of an Annuity; Amortization

CHAPTER 5 Finance OUTLINE Even though you re in college now, at some time, probably not too far in the future, you will be thinking of buying a house. And, unless you ve won the lottery, you will need

### Problem Set: Annuities and Perpetuities (Solutions Below)

Problem Set: Annuities and Perpetuities (Solutions Below) 1. If you plan to save \$300 annually for 10 years and the discount rate is 15%, what is the future value? 2. If you want to buy a boat in 6 years

### Vilnius University. Faculty of Mathematics and Informatics. Gintautas Bareikis

Vilnius University Faculty of Mathematics and Informatics Gintautas Bareikis CONTENT Chapter 1. SIMPLE AND COMPOUND INTEREST 1.1 Simple interest......................................................................

### 4 Annuities and Loans

4 Annuities and Loans 4.1 Introduction In previous section, we discussed different methods for crediting interest, and we claimed that compound interest is the correct way to credit interest. This section

### ONLINE PAGE PROOFS. Financial arithmetic

3 Financial arithmetic 3.1 Kick off with CAS 3.2 Percentage change 3.3 Financial applications of ratios and percentages 3.4 Simple interest applications 3.5 Compound interest applications 3.6 Purchasing

### Chapter 1. Theory of Interest 1. The measurement of interest 1.1 Introduction

Chapter 1. Theory of Interest 1. The measurement of interest 1.1 Introduction Interest may be defined as the compensation that a borrower of capital pays to lender of capital for its use. Thus, interest

### Bond Price Arithmetic

1 Bond Price Arithmetic The purpose of this chapter is: To review the basics of the time value of money. This involves reviewing discounting guaranteed future cash flows at annual, semiannual and continuously

### CHAPTER 4 DISCOUNTED CASH FLOW VALUATION

CHAPTER 4 DISCOUNTED CASH FLOW VALUATION Solutions to Questions and Problems NOTE: All-end-of chapter problems were solved using a spreadsheet. Many problems require multiple steps. Due to space and readability

### Real Estate. Refinancing

Introduction This Solutions Handbook has been designed to supplement the HP-2C Owner's Handbook by providing a variety of applications in the financial area. Programs and/or step-by-step keystroke procedures

### Appendix C- 1. Time Value of Money. Appendix C- 2. Financial Accounting, Fifth Edition

C- 1 Time Value of Money C- 2 Financial Accounting, Fifth Edition Study Objectives 1. Distinguish between simple and compound interest. 2. Solve for future value of a single amount. 3. Solve for future

### Chapter 3 Mathematics of Finance

Chapter 3 Mathematics of Finance Section 3 Future Value of an Annuity; Sinking Funds Learning Objectives for Section 3.3 Future Value of an Annuity; Sinking Funds The student will be able to compute the

### Chapter 6. Time Value of Money Concepts. Simple Interest 6-1. Interest amount = P i n. Assume you invest \$1,000 at 6% simple interest for 3 years.

6-1 Chapter 6 Time Value of Money Concepts 6-2 Time Value of Money Interest is the rent paid for the use of money over time. That s right! A dollar today is more valuable than a dollar to be received in

### Chapter 1: Time Value of Money

1 Chapter 1: Time Value of Money Study Unit 1: Time Value of Money Concepts Basic Concepts Cash Flows A cash flow has 2 components: 1. The receipt or payment of money: This differs from the accounting

### Compound Interest Formula

Mathematics of Finance Interest is the rental fee charged by a lender to a business or individual for the use of money. charged is determined by Principle, rate and time Interest Formula I = Prt \$100 At

### In January 2008 Larry had 90 000 USD to invest for his retirement in January 2011.

1. Give all answers in this question to the nearest whole currency unit. In January 2008 Larry had 90 000 USD to invest for his retirement in January 2011. He invested 40 000 USD in US government bonds

### n(n + 1) 2 1 + 2 + + n = 1 r (iii) infinite geometric series: if r < 1 then 1 + 2r + 3r 2 1 e x = 1 + x + x2 3! + for x < 1 ln(1 + x) = x x2 2 + x3 3

ACTS 4308 FORMULA SUMMARY Section 1: Calculus review and effective rates of interest and discount 1 Some useful finite and infinite series: (i) sum of the first n positive integers: (ii) finite geometric

### 2. How would (a) a decrease in the interest rate or (b) an increase in the holding period of a deposit affect its future value? Why?

CHAPTER 3 CONCEPT REVIEW QUESTIONS 1. Will a deposit made into an account paying compound interest (assuming compounding occurs once per year) yield a higher future value after one period than an equal-sized

### , plus the present value of the \$1,000 received in 15 years, which is 1, 000(1 + i) 30. Hence the present value of the bond is = 1000 ;

2 Bond Prices A bond is a security which offers semi-annual* interest payments, at a rate r, for a fixed period of time, followed by a return of capital Suppose you purchase a \$,000 utility bond, freshly

### Introduction to Real Estate Investment Appraisal

Introduction to Real Estate Investment Appraisal Maths of Finance Present and Future Values Pat McAllister INVESTMENT APPRAISAL: INTEREST Interest is a reward or rent paid to a lender or investor who has

### Warm-up: Compound vs. Annuity!

Warm-up: Compound vs. Annuity! 1) How much will you have after 5 years if you deposit \$500 twice a year into an account yielding 3% compounded semiannually? 2) How much money is in the bank after 3 years

### University of Rio Grande Fall 2010

University of Rio Grande Fall 2010 Financial Management (Fin 20403) Practice Questions for Midterm 1 Answers the questions. (Or Identify the letter of the choice that best completes the statement if there

### 1. If you wish to accumulate \$140,000 in 13 years, how much must you deposit today in an account that pays an annual interest rate of 14%?

Chapter 2 - Sample Problems 1. If you wish to accumulate \$140,000 in 13 years, how much must you deposit today in an account that pays an annual interest rate of 14%? 2. What will \$247,000 grow to be in

### CHAPTER 5 INTRODUCTION TO VALUATION: THE TIME VALUE OF MONEY

CHAPTER 5 INTRODUCTION TO VALUATION: THE TIME VALUE OF MONEY 1. The simple interest per year is: \$5,000.08 = \$400 So after 10 years you will have: \$400 10 = \$4,000 in interest. The total balance will be

### Formulas and Approaches Used to Calculate True Pricing

Formulas and Approaches Used to Calculate True Pricing The purpose of the Annual Percentage Rate (APR) and Effective Interest Rate (EIR) The true price of a loan includes not only interest but other charges

### CHAPTER 4 DISCOUNTED CASH FLOW VALUATION

CHAPTER 4 DISCOUNTED CASH FLOW VALUATION Answers to Concepts Review and Critical Thinking Questions 1. Assuming positive cash flows and interest rates, the future value increases and the present value

### Calculating financial position and cash flow indicators

Calculating financial position and cash flow indicators Introduction When a business is deciding whether to grant credit to a potential customer, or whether to continue to grant credit terms to an existing

### MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

Exam Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The government agency that oversees the banking system and is responsible for the conduct

### Chapter 4: Time Value of Money

FIN 301 Homework Solution Ch4 Chapter 4: Time Value of Money 1. a. 10,000/(1.10) 10 = 3,855.43 b. 10,000/(1.10) 20 = 1,486.44 c. 10,000/(1.05) 10 = 6,139.13 d. 10,000/(1.05) 20 = 3,768.89 2. a. \$100 (1.10)

### averages simple arithmetic average (arithmetic mean) 28 29 weighted average (weighted arithmetic mean) 32 33

537 A accumulated value 298 future value of a constant-growth annuity future value of a deferred annuity 409 future value of a general annuity due 371 future value of an ordinary general annuity 360 future

1.0 ALTERNATIVE SOURCES OF FINANCE Module 1: Corporate Finance and the Role of Venture Capital Financing Alternative Sources of Finance TABLE OF CONTENTS 1.1 Short-Term Debt (Short-Term Loans, Line of

### FINANCIAL MATHEMATICS FIXED INCOME

FINANCIAL MATHEMATICS FIXED INCOME 1. Converting from Money Market Basis to Bond Basis and vice versa 2 2. Calculating the Effective Interest Rate (Non-annual Payments)... 4 3. Conversion of Annual into

### Amortized Loan Example

Amortized Loan Example Chris Columbus bought a house for \$293,000. He put 20% down and obtained a 3 simple interest amortized loan for the balance at 5 % annually interest for 30 8 years. a. Find the amount

### MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

Survey of Macroeconomics, MBA 641 Fall 2006, Quiz 4 Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The central bank for the United States

### 1.3.2015 г. D. Dimov. Year Cash flow 1 \$3,000 2 \$5,000 3 \$4,000 4 \$3,000 5 \$2,000

D. Dimov Most financial decisions involve costs and benefits that are spread out over time Time value of money allows comparison of cash flows from different periods Question: You have to choose one of

### Capital Investment Analysis and Project Assessment

PURDUE EXTENSION EC-731 Capital Investment Analysis and Project Assessment Michael Boehlje and Cole Ehmke Department of Agricultural Economics Capital investment decisions that involve the purchase of

### Chapter 27 Pricing Math. Section 27.1 Calculating Prices Section 27.2 Calculating Discounts

Chapter 27 Pricing Math Section 27.1 Calculating Prices Section 27.2 Calculating Discounts Calculating Prices Key Terms gross profit maintained markup Objectives Explain how a firm s profit is related

### A) 1.8% B) 1.9% C) 2.0% D) 2.1% E) 2.2%

1 Exam FM Questions Practice Exam 1 1. Consider the following yield curve: Year Spot Rate 1 5.5% 2 5.0% 3 5.0% 4 4.5% 5 4.0% Find the four year forward rate. A) 1.8% B) 1.9% C) 2.0% D) 2.1% E) 2.2% 2.

### Appendix. Time Value of Money. Financial Accounting, IFRS Edition Weygandt Kimmel Kieso. Appendix C- 1

C Time Value of Money C- 1 Financial Accounting, IFRS Edition Weygandt Kimmel Kieso C- 2 Study Objectives 1. Distinguish between simple and compound interest. 2. Solve for future value of a single amount.

### CHAPTER 16 Current Asset Management and Financing

Copyright 2008 by the Foundation of the American College of Healthcare Executives 6/13/07 Version 16-1 CHAPTER 16 Current Asset Management and Financing Investment and financing policies Cash and marketable

### Chapter 2 The Time Value of Money

Chapter 2 The Time Value of Money 2-1 The effective interest rate is 19.56%. If there are 12 compounding periods per year, what is the nominal interest rate? i eff = (1 + (r/m)) m 1 r/m = (1 + i eff )

### Investments, Chapter 4

Investments, Chapter 4 Answers to Selected Problems 2. An open-end fund has a net asset value of \$10.70 per share. It is sold with a front-end load of 6 percent. What is the offering price? Answer: When

### Time value of money. appendix B NATURE OF INTEREST

appendix B Time value of money LEARNING OBJECTIVES After studying this appendix, you should be able to: Distinguish between simple and compound interest. Solve for future value of a single amount. Solve

### Financial Mathematics for Actuaries. Chapter 1 Interest Accumulation and Time Value of Money

Financial Mathematics for Actuaries Chapter 1 Interest Accumulation and Time Value of Money 1 Learning Objectives 1. Basic principles in calculation of interest accumulation 2. Simple and compound interest

### ST334 ACTUARIAL METHODS

ST334 ACTUARIAL METHODS version 214/3 These notes are for ST334 Actuarial Methods. The course covers Actuarial CT1 and some related financial topics. Actuarial CT1 which is called Financial Mathematics

### The Measurement of the Business Income. 1 by recording revenues when earned and expenses when incurred. 2 by adjusting accounts

Recap from Week 3 The Measurement of the Business Income The primary objective of accounting is measuring the net income of the businesses according to the generally accepted accounting principles. Net

### How To Calculate A Balance On A Savings Account

319 CHAPTER 4 Personal Finance The following is an article from a Marlboro, Massachusetts newspaper. NEWSPAPER ARTICLE 4.1: LET S TEACH FINANCIAL LITERACY STEPHEN LEDUC WED JAN 16, 2008 Boston - Last week

### DISCOUNTED CASH FLOW VALUATION and MULTIPLE CASH FLOWS

Chapter 5 DISCOUNTED CASH FLOW VALUATION and MULTIPLE CASH FLOWS The basic PV and FV techniques can be extended to handle any number of cash flows. PV with multiple cash flows: Suppose you need \$500 one

### TIME VALUE OF MONEY (TVM)

TIME VALUE OF MONEY (TVM) INTEREST Rate of Return When we know the Present Value (amount today), Future Value (amount to which the investment will grow), and Number of Periods, we can calculate the rate

### Oklahoma State University Spears School of Business. Time Value of Money

Oklahoma State University Spears School of Business Time Value of Money Slide 2 Time Value of Money Which would you rather receive as a sign-in bonus for your new job? 1. \$15,000 cash upon signing the

### PRESENT VALUE ANALYSIS. Time value of money equal dollar amounts have different values at different points in time.

PRESENT VALUE ANALYSIS Time value of money equal dollar amounts have different values at different points in time. Present value analysis tool to convert CFs at different points in time to comparable values

### The Time Value of Money

The Time Value of Money Time Value Terminology 0 1 2 3 4 PV FV Future value (FV) is the amount an investment is worth after one or more periods. Present value (PV) is the current value of one or more future

### Chapter 2 Applying Time Value Concepts

Chapter 2 Applying Time Value Concepts Chapter Overview Albert Einstein, the renowned physicist whose theories of relativity formed the theoretical base for the utilization of atomic energy, called the

### Matt 109 Business Mathematics Notes. Spring 2013

1 To be used with: Title: Business Math (Without MyMathLab) Edition: 8 th Author: Cleaves and Hobbs Publisher: Pearson/Prentice Hall Copyright: 2009 ISBN #: 978-0-13-513687-4 Matt 109 Business Mathematics

### Accounting Building Business Skills. Interest. Interest. Paul D. Kimmel. Appendix B: Time Value of Money

Accounting Building Business Skills Paul D. Kimmel Appendix B: Time Value of Money PowerPoint presentation by Kate Wynn-Williams University of Otago, Dunedin 2003 John Wiley & Sons Australia, Ltd 1 Interest