Scribd Logo
Upload

Welcome to Scribd!

  • 50 views

    Equation of Value

    Uploaded by

    Kim T
    1) Two annual rates of interest are equivalent if they earn the same compound amount over the same period of time. Equations are used to compare nominal rates, nominal and simple interest rates, and nominal and discount rates. 2) Equations of value state that the present value of obligations must equal the present value of payments when brought to a common date, known as the comparison date. These values are determined using compound interest calculations. 3) Sample problems demonstrate solving equations of value to determine unknown payments that will fully repay multiple debts when discounted or accumulated to a future date at a given interest rate.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    Equation of Value

    Uploaded by

    Kim T
    50 views17 pages
    1) Two annual rates of interest are equivalent if they earn the same compound amount over the same period of time. Equations are used to compare nominal rates, nominal and simple interest rates, and nominal and discount rates. 2) Equations of value state that the present value of obligations must equal the present value of payments when brought to a common date, known as the comparison date. These values are determined using compound interest calculations. 3) Sample problems demonstrate solving equations of value to determine unknown payments that will fully repay multiple debts when discounted or accumulated to a future date at a given interest rate.

    Original Description:

    busana1

    Copyright

    © © All Rights Reserved

    Available Formats

    PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    1) Two annual rates of interest are equivalent if they earn the same compound amount over the same period of time. Equations are used to compare nominal rates, nominal and simple interest rates, and nominal and discount rates. 2) Equations of value state that the present value of obligations must equal the present value of payments when brought to a common date, known as the comparison date. These values are determined using compound interest calculations. 3) Sample problems demonstrate solving equations of value to determine unknown payments that will fully repay multiple debts when discounted or accumulated to a future date at a given interest rate.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    50 views17 pages

    Equation of Value

    Uploaded by

    Kim T
    1) Two annual rates of interest are equivalent if they earn the same compound amount over the same period of time. Equations are used to compare nominal rates, nominal and simple interest rates, and nominal and discount rates. 2) Equations of value state that the present value of obligations must equal the present value of payments when brought to a common date, known as the comparison date. These values are determined using compound interest calculations. 3) Sample problems demonstrate solving equations of value to determine unknown payments that will fully repay multiple debts when discounted or accumulated to a future date at a given interest rate.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    You are on page 1of 17

    REVIEW

    EQUIVALENT RATES

    Compound Interest
    Equivalent Rates
    • Two annual rates of interest with different
    conversion periods are said to be equivalent if they
    earn the same compound amount for the same time.
    • Derivation of the formulas are based on the
    assumption that the future amount obtained are
    equal.
    • We consider the comparisons:
    a) two nominal rates
    b) nominal rate and simple interest rate
    c) nominal rate and discount rate

    Compound Interest
    Check-up Seatwork

    Compound Interest
    EQUATION OF VALUE

    Compound Interest
    Values of Obligation and Their Comparison

    Compound Interest
    Compound Interest
    Compound Interest
    Equations of Values
    • a mathematical statement which says that the
    dated values of two sets of amounts are equal
    when brought to a particular point in time (the
    comparison date)
    • In the context of borrowing, the equation of
    values says that
    Obligation(s) = Payment(s)
    • These sums are obtained by either accumulating
    or discounting the debts incurred or the
    payments made toward the comparison date.
    Compound Interest
    • Two or more amounts of money due on different
    dates cannot be compared unless all the amounts
    are brought to the same date. This date is called
    the comparison date.
    • An amount of money due on a given date is
    brought to the comparison date by either
    accumulating or discounting.

    Compound Interest
    1. What single payment at the end of 6 years would
    replace the following debts?
    a) Php29,000 due at the end of a year without interest
    b) Php690,000 due at the end of 8 years at 14%
    compounded quarterly
    Money is worth 8.5% effective.

    29,000 690,000(1.035) 32
    Obligation(s)
    Payment(s) 1 6 8
      x

    x  Php1,805,909.97 Compound Interest


    2. For an amount borrowed from a credit cooperative,
    Janice needs to pay Php100,000 in 5 years. After 2 ½
    years , she made a Php50,000 payment. If money is
    worth 8% compounded semi-annually, how much
    would she have to pay on the 5th year to fully settle
    the loan?

    100,000

    Obligation(s)
    Payment(s) 2.5 5
    
    50,000 x

    Compound Interest
    100,000

    Obligation(s)
    Payment(s) 2.5 5
    
    50,000 x

     

    x  Php39,167.35 Compound Interest


    3. If money is worth 8% effective, what single payment
    in 5 years will repay the following two debts:
    a) Php125,000 due at once
    b) Php500,000 due in 8 years

    125,000 500,000

    Obligation(s)
    Payment(s) 1 5 8
     x

     Compound Interest
    125,000 500,000

    Obligation(s)
    Payment(s) 1 5 8
     x
    =
    125,000(1.08)5  500,000(1.08)3  x
    
    x  Php580,582.13

      
    
    Compound Interest
    4. As payments for debts of Php300,000 due at the end
    of 4 years and Php485,000 at the end of 8 years, Jane
    agrees to pay Php50,000 at once and Php250,000 at
    the end of 5 years. She will make a third and final
    payment at the end of 10 years. How much would it
    be if money is worth 14% compounded semi-
    annually.

    300,000 485,000

    Obligation(s)
    Payment(s) 1 4 5 8 10
    
    50,000 
    250,000 x
    Compound Interest
    300,000 485,000

    Obligation(s)
    Payment(s) 1 4 5 8 10
    
    50,000 
    250,000 x

    =
       485,000(1.07) 
    300,000(1.07) 12
     4

    50,000(1.07) 20  250,000(1.07)10  x
    x  Php626,121.48
      
       Compound Interest
    Exercises
    • .

    • .

    Compound Interest

    You might also like

    pFad - Phonifier reborn

    Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

    Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


    Alternative Proxies:

    Alternative Proxy

    pFad Proxy

    pFad v3 Proxy

    pFad v4 Proxy