11. money put at risk over time
money is time
savers and borrowers
(1+r)n
insurance
limited liability corporations
double entry accounting
Financial Capital
15. S&P 500
Weighted by size
Better indicator
NASDAQ
3,000+ Stocks
smaller and
high tech
National Association of Securities
Dealers Automated Quotations
22. Partnership
two or more owners
easy to create
combine talents
all are liable
disagreements
ends with death
23. Corporation
one to many owners
limited liability
raise financial capital
does not die with shareholders
harder to create
more regulation
double taxation
37. number of periods
Value r = 5%
r = 10%
r = 15%
Value = (1 + r)n r = rate
n = number of periods
38. number of periods
Value
r = 15%
Value = (1 + r)n r = rate
n = number of periods
Future
Value
Present
Value
39. FutureValue?
Future Value = Amount Today x Factor
Factor is the Growth Formula
(1 + r )
n
r = rate
n = time periods
40. FutureValue?
(1 + r )
n
r = 10% or 0.10
n = 5 years
(1 + 0.10)5
(1.10)5
1.61
41. FutureValue?
Future Value = Amount Today x Factor
$161 = $100 x 1.61
Future Value is compounding
Future Value is multiplying
42. PresentValue?
Present Value = Future Amount Ă· Factor
Present Value = $500 Ă· 1.61
$310.56 = $500 Ă· 1.61
Present Value is discounting
Present Value is dividing
43. Finance
Unknown - Present Value or Future Value?
Must know rate and number of periods
Compute Factor with formula
(1+r)n
If FV multiply
If PV divide