6LQFH￿WKH￿FDOFXODWHG￿YDOXH￿RI￿1￿LV￿EHWZHHQ￿￿￿DQG￿￿￿￿LW￿ZLOO￿WDNH￿VL[￿\HDUV￿RI￿ DQQXDO￿FRPSRXQGLQJ￿WR￿DFKLHYH￿D￿EDODQFH￿RI￿DW￿OHDVW￿￿￿￿￿￿￿￿￿&DOFXODWH￿WKH￿ DFWXDO￿EDODQFH￿DW￿WKH￿HQG￿RI￿VL[￿\HDUV￿

￿P

6.00

6HWV￿P￿WR￿￿￿\HDUV￿

/

3,035.28

&DOFXODWHV￿DPRXQW￿\RX￿

 

 

FDQ￿ZLWKGUDZ￿DIWHU￿￿￿

 

 

\HDUV￿

Example: An Individual Retirement Account. <RX￿RSHQHG￿DQ￿ LQGLYLGXDO￿UHWLUHPHQW￿DFFRXQW￿RQ￿$SULO￿￿￿￿￿￿￿￿￿￿￿ZLWK￿D￿GHSRVLW￿RI￿￿￿￿￿￿￿￿￿

￿￿￿￿￿￿￿LV￿GHGXFWHG￿IURP￿\RXU￿SD\FKHFN￿DQG￿\RX￿DUH￿SDLG￿WZLFH￿D￿PRQWK￿￿ 7KH￿DFFRXQW￿SD\V￿￿￿￿￿￿DQQXDO￿LQWHUHVW￿FRPSRXQGHG￿VHPLPRQWKO\￿￿+RZ￿ PXFK￿ZLOO￿EH￿LQ￿WKH￿DFFRXQW￿RQ￿$SULO￿￿￿￿￿￿￿￿￿"

 

 

 

 

 

I/YR = 6.3%

 

 

 

 

 

N = 360 (15 years × 24 half-months)

 

 

 

 

 

P/YR = 24

(Half-months periods)

 

 

. . .

 

 

 

 

 

 

1

2

3

4

 

 

 

FV= ?

360

PMT = -80.00PV = -2,000.00

6HW￿WR￿(QG￿PRGH￿￿3UHVV￿*O￿LI￿BEGIN￿DQQXQFLDWRU￿LV￿GLVSOD\HG￿

5: Time Value of Money Calculations 61