COM 240 Chapter Notes - Chapter 6: Effective Interest Rate, Annual Percentage Rate

• School: University of Victoria
• Department: Commerce
• Course: COM 240
• Professor: Majerbi Basma

Document Summary

Com 240 - chapter 6: discounted cash flow valuation: future values for multiple cash ows there are 2 different methods: (ex. You deposit today in an account paying 8%. How much will you have in 2 years?) (1) compound the accumulated balance forward (2) calculate the future value of each ow & then one year at a time (ex. x 1. 08 = . 64) add them up (ex. . 64 + = . 64: present values for multiple cash ows there are also 2 different methods: (1) discount back one period at a time (2) calculate the present value individually & (ex. You have an investment that will pay at the end of every year for the next 5 years, earning an interest rate of 6%. How much do you have to invest today?) . 40 + . 00 + . 62 + . 09 + . 26 = . 37 then add them up (ex.