FINS1613 Lecture 2: FINS Week 2 Lect
Document Summary
Financial mathematics equations are always stated in terms of periods and interest rates per period. Interest rates are often quoted in terms of an annual percentage rate (apr) Aprs must be converted into number of periods and interest rates per period for calculations annual percentage rate (apr) It is equal to the total interest that would be earned in a year without compounding. The total amount of interest that will be earned at the end of one year with compounding. Ear is the interest rate based on a hypothetical, single compounding period per year. Projects have cash flows occurring at different points in time. Build a timeline of the stream of cash flows describing the timing and amount of expected cash flows. Computing the value of the stream as of a reference point in time, usually the initial period: future value of a stream of cash flows. You plan on investing immediately in an account paying 5% per period.