ECO 1192 Lecture Notes - Lecture 2: Effective Interest Rate, Cash Flow, Airborne Early Warning And Control
4 Oct 2017
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Time value of money: equivalence: time value of money, preference for consuming goods and services now rather than later, the stronger the preference for consuming now over later, the more important is the required compensation. Interpretation depends on one"s perspective: positive for cash inflows (e. g. , revenues, negative for cash outflows (e. g. , expenses, length represents the magnitude ($) of the cash flow. Important to show when cash flows occur during a project"s life: eoy1 (end of year 1); eoy2, , the rate of interest and its within year frequency of calculation must be known. Simple interest (no compounding) interest generated by principal only. Interest income is based on: the number of finite interest periods per year, the amount of money initially borrowed or loaned. Interest income is based on: number of interest periods, the amount of money borrowed or loaned. Interest earned or owed in each interest period: f = p (f/p, i%, n) i. e. , future worth.
