BU111 Lecture Notes - Lecture 6: Nxp Semiconductors, Savings Account, Lease
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This concept is important for leases, mortgages, bonds, retirement contributions, stock valuation, project selection. How much do you have to deposit today to have after 1 year with 4% rate compounded annually. Or what is the present value of to be received in 1 year with a 4% discount rate. How much do you have to deposit today to have after 3 years with 4% rate compounded annually. Or what is the present value of to be received in 3 years with a 4% discount rate. Multiple but equal payments over equal periods of times. Payment and interest periods must be the same. Adjust the compounding rate to match payment f(cid:396)e(cid:395)ue(cid:374)(cid:272)y (cid:894)this is you(cid:396) (cid:374)e(cid:449) (cid:862)(cid:396)(cid:863) (cid:448)alue(cid:895) Interest and payment periods same but more than once per year. Divide r by p number of payments per year. Rnom is the rate given, m=number of compounding periods per year, p=# of payments.
