Pamela Peterson Drake, Frank J Fabozzi

Foundations and Applications of the Time Value of Money

• Gebundenes Buch

Produktbeschreibung

Understanding financial transactions--whether involving investing, borrowing, or lending--requires an understanding of the time value of money (TVM), as well as the financial mathematics that go along with it. And while TVM is an essential aspect of finance, there aren't many resources that take the time to fully explain it. In this book, the experienced author team of Pamela Peterson Drake and Frank Fabozzi fully expand upon the type of TVM concepts usually presented as part of an overview given in other general finance books. Throughout these pages, various TVM concepts and principles are discussed, with the authors offering examples in each chapter 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 included in an appendix, to familiarize you with basic terms. Divided into two comprehensive parts--The Basics of the Time Value of Money and A Few Applications--this comprehensive guide can help you analyze almost any financial transaction and evaluate cash flows to determine values at different points in time or returns on investments. Written with both the aspiring and experienced financial professional in mind, Foundations and Applications of the Time Value of Money * Deals with the compounding and discounting of lump sums--translating single values through time * Shows how valuing series of cash flows is a simple extension of discounting or compounding lump sums * Demonstrates how to calculate the annual percentage rate, the effective annual rate, and the internal rate of return for financial transactions * Looks at loans and how they may be amortized * Focuses on deferred annuities--which are typically used within the retirement arena--and other "saving-for-future-spending" scenarios in which there is more than one withdrawal of funds in the future * Addresses the valuation of stocks and bonds using TVM mathematics Rounding out this detailed discussion, Peterson Drake and Fabozzi examine the applications of the TVM mathematics with regard to: evaluating whether to get an MBA, deciding whether to lease or buy a car, and whether gold is a good investment. And while this is not a personal finance book, the authors chose examples that might interest you in immediately applying the techniques outlined here. Making more informed financial decisions relies on a firm grasp of the time value of money. This book has the insights and advice needed to achieve such a goal.

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Produktdetails

• Verlag: Wiley
• Seitenzahl: 320
• Erscheinungstermin: 1. September 2009
• Englisch
• Abmessung: 235mm x 157mm x 22mm
• Gewicht: 618g
• ISBN-13: 9780470407363
• ISBN-10: 0470407360
• Artikelnr.: 26431700

Autorenporträt

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.

Inhaltsangabe

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