Class Notes (836,583)
Canada (509,859)
Commerce (1,910)
Lecture

Commerce 2FA3.docx

2 Pages
135 Views
Unlock Document

Department
Commerce
Course
COMMERCE 2FA3
Professor
Dr.Richard Deeves
Semester
Winter

Description
Commerce 2FA3: Chapter 2 – Time Value 1. Present values and future values 2. Multiple cashflows 3. Annuities and perpetuities 4. Amortized loans Fibonacci and his friend Marco • Fibonacci was an Italian mathematician, living in middle ages in Pisa • His friend Marco (who didn’t relish working) had a sum of money and he wanted to know how long it would last given his spending rate (after which he would have to work). • His friend had 1000 florins. Spending 1/x of this amount per year, Marco’s money would run out in x years. • But banking was being developed in this part of Italy at the time and his friend wisely had his funds deposited in a Pisan bank that paid 20% interest/year Let’s think it through.. • Say he spent 300 fls/year • Year 1: IN: 200 OUT: 300 BALANCE: 900 • Year 2: IN: 180 (20% of 900) OUT: 300 BALANCE: 780 • Fibonacci thought long and hard about this Present value and time lines (2.1) V 0 V /11+k) (2.2) V 0 V /21+k) 2 (2.3) V 0 V/(t+k) t (2.4) V 0 V *tPVIF(k;t) Reversing direction and future value (2.3) V 0 V/(t+k) t (2.5) V t V *0(1+k) = V * F0IF(k;t) Using time value of money formulas (k = 10%) • PV of $500 received
More Less

Related notes for COMMERCE 2FA3

Log In


OR

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


OR

By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.


Submit