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EC 314: Public and Private Investment Q2: Time Value
EC 314: Public and Private Investment Q2: Time Value
(F |P, i, N ) F = P (1 N
+ i)N
(P |A, i, N ) P = A (1+i) −1
N
i(1+i)
N −iN −1
(P |G, i, N ) P = G (1+i)2 N
i (1+i)N
1−(1+g) (1+i)−N N
(P |A1 , g, i, N ) P = A1 i−g or P = A1 1+i if : i = g
2
0 0
−2
−5
−4
−6
0 2 4 6 8
Period
Off By
One
1. Write an equation, in factor notation, that describes the present worth of this cash
flow sequence.
2. Write an equivelent equation in factor notation, i.e., decompose the cash flow differ-
ently.
3. Calculate the present worth of this series when the interest rate is 10.00%?