v Understand what is meant by "the time
value of money."
v Understand the relationship between present
and future value.
v Describe how the interest rate can be used to
adjust the value of cash flows –
both forward and backward – to a single point
in time.
v Calculate both the future and present value
of: (a) an amount invested today; (b) a
stream of equal cash flows (an
annuity); and (c) a stream of mixed cash flows.
v Distinguish between an “ordinary annuity” and
an “annuity due.”
v Use interest factor tables and understand how
they provide a shortcut to
calculating present and future values.
v Use interest factor tables to find an unknown
interest rate or growth rate when
the number of time periods and future and
present values are known.
v Build an “amortization schedule” for an
installment-style loan.
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