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Raymond Grinnell (100)

Lecture 3

Department

MathematicsCourse Code

MATA32H3Professor

Raymond GrinnellLecture

3This

**preview**shows half of the first page. to view the full**3 pages of the document.**MATA 32 – Lecture 3 – Present Value, Future Value, and Equation of Value

Present and Future Value (5.2):

These are only about perspective

FV: If = principal (now), then

o is the future value of an investment of now

PV: If = compounded amount (now) then

o is the present (or past) value of an amount now

We can combine PV and FV into 1equation

o

Example:

In 5 years we need $35000 in an account. Interest is compounded weekly at 4.3% APR. What is

the present amount needed to be invested?

; where (All in units of $1000)

Therefore, $28,231.46 must be invested now to reach $35000 in 5 years.

Equations of Value (p. 214):

We have a “long period of time” throughout which we have interest, debt, and payment

(financial transaction)

An Equation of Value (EoV) is an equation that describes interest, debt, and payment

and allows us to calculate these 3 factors at specific times

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