Foundations and Applications of the Time Value of Money
1st Edition
Published on 18. September 2009
Book
Hardback
320 pages
978-0-470-40736-3 (ISBN)
Description
Comprehensive coverage of the time value of money
In this book, authors Pamela Peterson Drake and Frank Fabozzi fully expand upon the type of time value of money (TVM) concepts usually presented as part of overviews given in other general finance books. Various TVM concepts and theories are discussed, with the authors offering many examples throughout each chapter that serve to reinforce the tools and techniques covered. Problems and detailed solutions-demonstrated using two different financial calculators, as well as Excel-are also provided at the end of each chapter, while glossary terms are provided in an appendix to familiarize you with basic terms.
Provides the basic foundations of the time value of money
Covers issues ranging from an introduction of financial mathematics to calculating present/future values and understanding loan amortization
Contains problem/solution sets throughout, so you can test your knowledge of the topics discussed
Understanding the time value of money is essential, and this reliable resource will help you gain a firm grasp of its many aspects and its real-world applications.
In this book, authors Pamela Peterson Drake and Frank Fabozzi fully expand upon the type of time value of money (TVM) concepts usually presented as part of overviews given in other general finance books. Various TVM concepts and theories are discussed, with the authors offering many examples throughout each chapter that serve to reinforce the tools and techniques covered. Problems and detailed solutions-demonstrated using two different financial calculators, as well as Excel-are also provided at the end of each chapter, while glossary terms are provided in an appendix to familiarize you with basic terms.
Provides the basic foundations of the time value of money
Covers issues ranging from an introduction of financial mathematics to calculating present/future values and understanding loan amortization
Contains problem/solution sets throughout, so you can test your knowledge of the topics discussed
Understanding the time value of money is essential, and this reliable resource will help you gain a firm grasp of its many aspects and its real-world applications.
More details
Series
Language
English
Place of publication
New York
United States
Target group
College/higher education
Product notice
sewn/stitched
Cloth over boards
With dust jacket
Dimensions
Height: 235 mm
Width: 157 mm
Thickness: 22 mm
Weight
618 gr
ISBN-13
978-0-470-40736-3 (9780470407363)
Copyright in bibliographic data and cover images is held by Nielsen Book Services Limited or by the publishers or by their respective licensors: all rights reserved.
Schweitzer Classification
Other editions
Additional editions
Pamela Peterson Drake | Frank J. Fabozzi
Foundations and Applications of the Time Value of Money
E-Book
07/2009
Wiley
€40.99
Available for download
Pamela Peterson Drake | Frank J. Fabozzi
Foundations and Applications of the Time Value of Money
E-Book
07/2009
Wiley
€40.99
Available for download
Persons
PAMELA PETERSON DRAKE, PHD, CFA, is the J. Gray Ferguson Professor of Finance and Department Head of Finance and Business Law at James Madison University. Prior to joining James Madison University, she was an associate dean and professor of finance at Florida Atlantic University, and, previous to that, a professor at Florida State University.
FRANK J. FABOZZI, PHD, CFA, CPA, is Professor in the Practice of Finance and Becton Fellow at the Yale School of Management, Editor of the Journal of Portfolio Management, and Associate Editor of the Journal of Structured Finance and the Journal of Fixed Income.
FRANK J. FABOZZI, PHD, CFA, CPA, is Professor in the Practice of Finance and Becton Fellow at the Yale School of Management, Editor of the Journal of Portfolio Management, and Associate Editor of the Journal of Structured Finance and the Journal of Fixed Income.
Content
Preface ix
About the Authors xi
Introduction xiii
Part One The Basics of the Time Value of Money 1
Chapter 1 The Value of Compounding 3
Compounding 7
Calculator and Spreadsheet Solutions 11
Frequency of Compounding 14
Summary 20
"Try It" Solutions 21
Problems 22
Chapter 2 Don't Discount Discounting 23
Discounting 23
Discounting More Than One Future Value 31
Determining the Number of Compounding Periods 35
Summary 38
"Try It" Solutions 38
Problems 39
Chapter 3 Cash Happens 41
Valuing a Stream of Future Cash Flows 42
Valuing a Perpetuity 51
Annuities 54
Summary 61
"Try It" Solutions 62
Problems 62
Chapter 4 Yielding for Yields 65
Annualized Rates of Interest 65
Determining the Unknown Interest Rate 77
Rules 88
Summary 89
"Try It" Solutions 90
Problems 90
Part Two A Few Applications 93
Chapter 5 Loans 95
Loan Amortization 95
Interest Rates on Loans 104
Determining the Number of Periods 108
Variations on the Theme 109
Summary 114
"Try It" Solutions 114
Problems 115
Chapter 6 Saving to Spend 119
Valuing a Deferred Annuity 119
Annuities with Annuities 126
A Bit of Realism 135
Summary 138
"Try It" Solutions 139
Problems 139
Chapter 7 Values Tied to Bonds 141
Bond Basics 142
Calculating the Yield to Maturity 154
Issues 157
Interest Rates 163
Yield Curves 164
Summary 169
"Try It" Solutions 170
Problems 171
Chapter 8 Taking Stock 173
What's in a Value? The Basics of Stock Valuation 174
Return on Stocks 187
Summary 192
"Try It" Solutions 193
Problems 195
Chapter 9 A Capital Idea 197
The Net Present Value 198
The Profitability Index 201
The Internal Rate of Return 204
Summary 214
"Try It" Solutions 215
Problems 216
Chapter 10 Finance Fact or Fiction? 219
Fact or Fiction: It Pays to Get an MBA 219
Fact or Fiction: Leasing a Car Costs Less than Buying a Car 222
Fact or Fiction: Gold Has Always Been a Good Investment 225
Summary 230
Appendix A Using Financial Calculators 231
Preparing the Calculator 232
The Basics 235
Financial Functions 237
Tips 242
Troubleshooting Problems 243
Appendix B Using Spreadsheets in Financial Calculations 247
The Basics 247
Time Value of Money Functions 248
Cash Flow Functions 252
Other Useful Functions for Financial Mathematics 253
Appendix C Formulas 255
Appendix D Glossary 261
Appendix E Solutions to End-of-Chapter Problems 265
Index 281
About the Authors xi
Introduction xiii
Part One The Basics of the Time Value of Money 1
Chapter 1 The Value of Compounding 3
Compounding 7
Calculator and Spreadsheet Solutions 11
Frequency of Compounding 14
Summary 20
"Try It" Solutions 21
Problems 22
Chapter 2 Don't Discount Discounting 23
Discounting 23
Discounting More Than One Future Value 31
Determining the Number of Compounding Periods 35
Summary 38
"Try It" Solutions 38
Problems 39
Chapter 3 Cash Happens 41
Valuing a Stream of Future Cash Flows 42
Valuing a Perpetuity 51
Annuities 54
Summary 61
"Try It" Solutions 62
Problems 62
Chapter 4 Yielding for Yields 65
Annualized Rates of Interest 65
Determining the Unknown Interest Rate 77
Rules 88
Summary 89
"Try It" Solutions 90
Problems 90
Part Two A Few Applications 93
Chapter 5 Loans 95
Loan Amortization 95
Interest Rates on Loans 104
Determining the Number of Periods 108
Variations on the Theme 109
Summary 114
"Try It" Solutions 114
Problems 115
Chapter 6 Saving to Spend 119
Valuing a Deferred Annuity 119
Annuities with Annuities 126
A Bit of Realism 135
Summary 138
"Try It" Solutions 139
Problems 139
Chapter 7 Values Tied to Bonds 141
Bond Basics 142
Calculating the Yield to Maturity 154
Issues 157
Interest Rates 163
Yield Curves 164
Summary 169
"Try It" Solutions 170
Problems 171
Chapter 8 Taking Stock 173
What's in a Value? The Basics of Stock Valuation 174
Return on Stocks 187
Summary 192
"Try It" Solutions 193
Problems 195
Chapter 9 A Capital Idea 197
The Net Present Value 198
The Profitability Index 201
The Internal Rate of Return 204
Summary 214
"Try It" Solutions 215
Problems 216
Chapter 10 Finance Fact or Fiction? 219
Fact or Fiction: It Pays to Get an MBA 219
Fact or Fiction: Leasing a Car Costs Less than Buying a Car 222
Fact or Fiction: Gold Has Always Been a Good Investment 225
Summary 230
Appendix A Using Financial Calculators 231
Preparing the Calculator 232
The Basics 235
Financial Functions 237
Tips 242
Troubleshooting Problems 243
Appendix B Using Spreadsheets in Financial Calculations 247
The Basics 247
Time Value of Money Functions 248
Cash Flow Functions 252
Other Useful Functions for Financial Mathematics 253
Appendix C Formulas 255
Appendix D Glossary 261
Appendix E Solutions to End-of-Chapter Problems 265
Index 281