Scribd
Upload
82 views

Time Value of Money

The document discusses key topics in corporate finance for weeks 2 and 3, including the time value of money, present and future values, discount rates, and annuities. The learning goals are to understand concepts like future and present value calculations, effects of compound interest, and procedures for loans, deposits, rates of return and periods. Formulas and examples are provided for topics like interest compounds, effective vs nominal rates, present value, annuities, and perpetuities.

Uploaded by

yolanda monika
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
82 views

Time Value of Money

The document discusses key topics in corporate finance for weeks 2 and 3, including the time value of money, present and future values, discount rates, and annuities. The learning goals are to understand concepts like future and present value calculations, effects of compound interest, and procedures for loans, deposits, rates of return and periods. Formulas and examples are provided for topics like interest compounds, effective vs nominal rates, present value, annuities, and perpetuities.

Uploaded by

yolanda monika
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 17

MINGGU 2 & 3

MANAJEMEN KEUANGAN I
Pokok Bahasan:
1. Konsep Dasar Keuangan
2. Nilai Waktu Uang
3. Nilai Sekarang dan Risiko
4. Nilai Sekarang da Tingkat Pengembalian
Tujuan Instruksional Khusus:
Mahasiswa mampu:
1. Menghitung nilai uang
2. Menghitung risiko dan nilai sekarang
3. Menghitung nilai sekarang dan tingkat pengembalian
Referensi:
1. Gitman, Lawrence J., (2003), “Principles of Managerial
Finance”, 10th ed., Addison-Wesley Word Student. (Chap 5)
2. Bearley & Myers, (2003), “Principles of Corporate Finance”,
7th ed. Mcraw Hill Inc. (Chap 2&3)

Manajemen Keuangan I Minggu 02-03 Page 1


Chapter 4 Time Value of Money

Learning Goals
1. Discuss the role of time value in finance, the use of computational
aids, and the basic patterns of cash flow.
2. Understand the concept of future value and present value, their
calculation for a single amounts, and the relationship of present
value to future value.
3. Find the future value and the present value of both an ordinary
annuity and an annuity due, and the present value of a
perpetuity.
4. Calculate both the future value and the present value of a mixed
stream of cash flows.
5. Understand the effect that compounding interest more frequently
than annually has on future value and the effective annual rate of
interest.
6. Describe the procedures involved in (1) determining deposits to
accumulate to a future sum, (2) loan amortization, (3) finding
interest or growth rates, and (4) finding an unknown number of
periods.

Manajemen Keuangan I Minggu 02-03 Page 2


The Role of Time Value in Finance
• Most financial decisions involve costs & benefits
that are spread out over time.
• Time value of money allows comparison of cash
flows from different periods.

Answer!
It depends on the interest rate!

Manajemen Keuangan I Minggu 02-03 Page 3


Time Value Terms
• PV0 = present value or beginning
amount
• k = interest rate
• FVn = future value at end of “n”
periods
• n = number of compounding
periods
• A = an annuity (series of equal
payments or receipts)

Manajemen Keuangan I Minggu 02-03 Page 4


Four Basic Models
• FVn = PV0(1+k)n = PV(FVIFk,n)

• PV0 = FVn[1/(1+k)n] = FV(PVIFk,n)

• FVAn = A (1+k)n - 1 = A(FVIFAk,n)


k

• PVA0 = A 1 - [1/(1+k)n] = A(PVIFAk,n)


k

Manajemen Keuangan I Minggu 02-03 Page 5


Compounding More Frequently
than Annually
• Compounding more frequently than once a year
results in a higher effective interest rate because you
are earning on interest on interest more frequently.
• As a result, the effective interest rate is greater than the
nominal (annual) interest rate.
• Furthermore, the effective rate of interest will increase
the more frequently interest is compounded.

Manajemen Keuangan I Minggu 02-03 Page 6


Compounding More Frequently
than Annually
• For example, what would be the difference in future
value if I deposit $100 for 5 years and earn 12% annual
interest compounded (a) annually, (b) semiannually,
(c) quarterly, an (d) monthly?
Annually: 100 x (1 + .12)5 = $176.23
Semiannually: 100 x (1 + .06)10= $179.09
Quarterly: 100 x (1 + .03)20= $180.61
Monthly: 100 x (1 + .01)60= $181.67

Manajemen Keuangan I Minggu 02-03 Page 7


Compounding More Frequently
than Annually
On Excel
Semi
Annually Quarterly Monthly
Annually
PV $ 100,00 $ 100,00 $ 100,00 $ 100,00
k 12,0 % 0,06 0,03 0,01
n 5 10 20 60
FV $ 176,23 $ 179,08 $ 180,61 $ 181,67

Manajemen Keuangan I Minggu 02-03 Page 8


Continuous Compounding
• With continuous compounding the number of
compounding periods per year approaches infinity.
• Through the use of calculus, the equation thus becomes:

FVn (continuous compounding) = PV x (ekxn)


where “e” has a value of 2.7183.

• Continuing with the previous example, find the Future


value of the $100 deposit after 5 years if interest is
compounded continuously.

Manajemen Keuangan I Minggu 02-03 Page 9


Continuous Compounding
• With continuous compounding the number of
compounding periods per year approaches infinity.
• Through the use of calculus, the equation thus
becomes:
FVn (continuous compounding) = PV x (ekxn)
where “e” has a value of 2.7183.

FVn = 100 x (2.7183).12x5 = $182.22

Manajemen Keuangan I Minggu 02-03 Page 10


Nominal & Effective Rates
• The nominal interest rate is the stated or
contractual rate of interest charged by a
lender or promised by a borrower.
• The effective interest rate is the rate actually
paid or earned.
• In general, the effective rate > nominal rate
whenever compounding occurs more than
once per year
EAR = (1 + k/m) m -1

Manajemen Keuangan I Minggu 02-03 Page 11


Nominal & Effective Rates

• For example, what is the effective rate of interest on


your credit card if the nominal rate is 18% per year,
compounded monthly?

EAR = (1 + .18/12) 12 -1
EAR = 19.56%

Manajemen Keuangan I
Sekolah Tinggi Ilmu Ekonomi Minggu 02-03 Page 12
Present Value
• Present value is the current dollar value of a future
amount of money.
• It is based on the idea that a dollar today is worth
more than a dollar tomorrow.
• It is the amount today that must be invested at a
given rate to reach a future amount.
• Calculating present value is also known as
discounting.
• The discount rate is often also referred to as the
opportunity cost, the discount rate, the required
return, or the cost of capital.

Manajemen Keuangan I Minggu 02-03 Page 13


Annuities
• Annuities are equally-spaced cash flows of equal
size.
• Annuities can be either inflows or outflows.
• An ordinary (deferred) annuity has cash flows that
occur at the end of each period.
• An annuity due has cash flows that occur at the
beginning of each period.
• An annuity due will always be greater than an
otherwise equivalent ordinary annuity because
interest will compound for an additional period.

Manajemen Keuangan I Minggu 02-03 Page 14


Present Value
of a Perpetuity
• A perpetuity is a special kind of annuity.

• With a perpetuity, the periodic annuity or cash flow


stream continues forever.
PV = Annuity/k
• For example, how much would I have to deposit today
in order to withdraw $1,000 each year forever if I can
earn 8% on my deposit?

PV = $1,000/.08 = $12,500

Manajemen Keuangan I Minggu 02-03 Page 15


Annuities
TABLE 4.1 Comparison of Ordinary Annuity
and Annuity Due Cash Flows
($1,000, 5 Years)
Annual Cash Flows
End of yeara Annuity A (ordinary) Annuity B (annuity due)
0 $ 0 $ 1,000
1 1,000 1,000
2 1,000 1,000
3 1,000 1,000
4 1,000 1,000
5 1,000 0
Totals $ 5,000 $ 5,000

The ends of years 0,1,2,3,4, and 5 are equivalent to the beginning of years 1,2,3,4,5,
and 6, respectively

Manajemen Keuangan I Minggu 02-03 Page 16


Loan Amortization

Manajemen Keuangan I Minggu 02-03 Page 17

You might also like