MGMT 20000 Chapter Notes - Chapter C: Interest
30 Jun 2016
School
Department
Course
Professor
Document Summary
Decrease in the value of money due to passage of time. Learning objective 1 contrast simple and compound interest. Simple interest: interest earned on the initial investment only. Compound interest: interest earned on the initial interest investment and previous interest. Learning objective 2 calculate the future value and present value of a single amount. Learning objective 3 calculate the future value and present value of an annuity. For a series of receipts and payments of cash. Annuity: cash payments of equal amounts over equal time intervals, simple annuity. Time value on an annuity present value. Useful in cases where certain liabilities require periodic interest payments. Help determine the liability to be reported today. Adjust the time factor by multiplying the number of periods by the number of compounding periods: semiannual, quarterly, monthly. Adjust the interest factor by dividing the interest by the number of compounding periods: semiannual, quarterly, monthly.
