Time Value of Money(英文版)(ppt 68页)
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Time Value of Money(英文版)(ppt 68页)内容简介
Time Value of Money(英文版)内容提要:
Effective Annual Rate (EAR = EFF%):
The annual rate that causes PV to grow to the same FV as under multi-period compounding.
Example: EFF% for 10%, semiannual:
FV = (1 + iNom/m)m = (1.05)2 = 1.1025.
EFF% = 10.25% because
(1.1025)1 = 1.1025.
Any PV would grow to same FV at 10.25% annually or 10% semiannually.
An investment with monthly payments is different from one with quarterly payments. Must put on EFF% basis to compare rates of return. Use EFF% only for comparisons.
Banks say “interest paid daily.” Same as compounded daily.
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