Upload
elmer-butler
View
215
Download
1
Embed Size (px)
Citation preview
Financial Algebra© Cengage Learning/South-Western Slide 11
10/1/201410/1/201410/1/201410/1/2014
WARM-UPWhat large purchases do you see in your
future?How does one determine how much money they
may need for retirement?How does one determine how much money they
must be saving in order to have enough saved to reach their goals?
Financial Algebra© Cengage/South-Western Slide 22
3-8
PRESENT VALUE OF INVESTMENTS
3-8
PRESENT VALUE OF INVESTMENTS
Calculate the present value of a single deposit investment.
Calculate the present value of a periodic deposit investment.
OBJECTIVES
Financial Algebra© Cengage Learning/South-Western
Present ValuePresent ValuePresent ValuePresent Value
To determine how much money one must save now in order to reach a desired goal in the future, we “tweak” either the compound interest formula or the future value formula from yesterday
Slide 33
Financial Algebra© Cengage Learning/South-Western
Present ValuePresent ValuePresent ValuePresent Value
If one is making only one deposit, they “tweak” the compound interest formula to determine how much they must save now
Slide 44
Financial Algebra© Cengage Learning/South-Western
If one plans to make multiple, periodic deposits in order to reach their goal, they must “tweak” to future value formula we learned yesterday
Slide 55
Financial Algebra© Cengage Learning/South-Western Slide 66
Example 2Example 2Example 2Example 2
Ritika just graduated from college. She wants $100,000 in her savings account after 10 years. How much must she deposit in that account now at a 3.8% interest rate, compounded daily, in order to meet that goal? Round up to the nearest dollar.
Financial Algebra© Cengage Learning/South-Western Slide 77
EXAMPLE 3EXAMPLE 3EXAMPLE 3EXAMPLE 3
Nick wants to install central air conditioning in his home in 3 years. He estimates the total cost to be $15,000. How much must he deposit monthly into an account that pays 4% interest, compounded monthly, in order to have enough money? Round up to the nearest hundred dollars.