Time Value of Money

Question 1

Compound interest formula

Answer 1

FV = PV(1+r)^n

FV = (1+r/n)^n-1x100

Question 2

Present value formula

Answer 2

PV = FV / (1+r)^n

Question 3

Accumulating and discounting of regular savings - formulas

Answer 3

See book page 114

Question 4

Real returns formula

Answer 4

Nominal returns - inflation

Real returns adjust for inflation, nominal returns ignore inflation

Question 5

Net present value formula

Answer 5

Check cards for formula

Represents the costs and cash received from an investment

Positive NPV = investment attractive

Negative NPV = unattractive investment