Welcome to Our Press en Tat Ion

8/8/2019 Welcome to Our Press en Tat Ion

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PRESENTED TO:PRESENTED TO:ShamsunShamsun NaharNahar

LecturerLecturerDepartment of ManagementDepartment of Management

Faculty of Business AdministrationFaculty of Business AdministrationBangladesh University of Business &Bangladesh University of Business &

TechnologyTechnology



Name ID NOIsmat Ara Naznin 034

Sharmin AkterBhat 06

Rajia Sultana 013



Time value of money is the value ofmoney figuring in a given amount ofinterest earned over a given amount oftime.

It is an important concept in financialmanagement . It can be used to compareinvestment alternatives and to solveproblems involving loans, mortgages,leases, savings and annuities.



Time Value Of Money

Present value Future valueBy which process future value isfind out from present value is calledcompounding.

By which process present value isfind out from future value is calleddiscounting.



C ompoundingFuturevalue

-$10,000 $3,000 $5,000 $4,000 $3,000 $2,000

0 1 2 3 4 5End of Year

PresentValue

Discounting



Interest rate:Interest rate is a rate which is charged orpaid for the use of money.

There are two types of interest rate.1.Simple interest.2.Compound interest.

Simple interest : Simple interest ischarged on the principal amount.C ompound interest : Compound interestis charged on principal amount andinterest on interest.



If with the passage of time money·s valueis shown in a horizontal line then it·scalled time line .

1000 2000 3000 4000

0 1 2 3Present Futurevalue value

Figure : Time line



C ash flow:Cash flow is the movement of cash into orout of a business, project or financialproduct.

Basic patterns of cash flows

Single Annuity MixedAmount stream

Due Ordinary



Single Amount:In single amount cash flow inflow oroutflow will be only one time.

Single amount

FVPV= FV=PV(1+i)^n

(1+i)^n



Annuity:The payment of equal amount of money

after equal time period is called annuity.There are two basic types of annuities.1.Ordinary annuity2.Annuity Due





Annuity Due: For annuity due the cash flowoccurs at the beginning of each period.

Annuity Due

11- (1+i)^n_1

PV=A+ A (1+i)^n-1 , FV=A (1+i)i i



Mixed stream:It has no particular pattern of cash flows.

Mixed stream

End Beginning

PV FV PV FV



PV=Present valueFV=Future valuei=interestn=Number of periodA=Annuitym=Turnover of interest



Amortization:The determination of the equal periodicloan payments necessary to provide alender with a specified interest returnand to repay the loan principal over aspecified period.

Loan Amortization schedule:A schedule of equal payments to repay aloan. It shows the allocation of each loanpayments to interest and principal.





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Welcome to Our Press en Tat Ion