Management and Organizational Studies 2277A/B Chapter Notes - Chapter 2: Interest, Cash Flow, Investment

• School: Western University
• Department: Management and Organizational Studies
• Course: Management and Organizational Studies 2277A/B
• Professor: Barry Hawn

Document Summary

The importance of the time value of money. Ch 2: applying time value concepts is especially important for estimating how your money may grow. P = principal or pv r = annual interest rate expressed as decimal or percent t = time (years: eg: deposit 1000 in high interest savings paying 3% simple annually. At the end of year one, bank will credit your account with 30$; Using a formula to determine future value of a single dollar amount in a compound interest rate environment, fv is determined by using the formula: fv = pv (1 + i/n) ^ nt. Fv = future value pv = present value i= annual interest rate (as a decimal) Using the fv formula for a single dollar amount fv = 1000(1+. 03)^20 = 1806. 11. Will notice that as the interest rate increases, the fvif becomes higher: means that the higher the rate of return, more your money will grow over a given time period.