PA 375- Midterm Exam Guide - Comprehensive Notes for the exam ( 14 pages long!)
Document Summary
Base year is the year which all dollars are being converted. Current year is the price index for the current [nominal] dollar values. Convert in 1950 to today"s number (2016) Convert . 70 in 1939 to today"s number (2016) Convert in 1943 to today"s number (2017) The amount of money an investment ( ) will grow (i) over a period of time (x). = present value of current investment i= interest rate x= number of times compounded in one period t= the number of interest period (time) Invest today for one year at 5%. We want to know today"s value of three years from now, at a 5% interest rate. Find the present value of a series of constant or level cash flows that occurs at the end of each period for some fixed number of periods. Example: you won the lottery; ,000 annually for ten years at a fixed interest rate of 5%.