Notes On Value Of Money - 1031 Words

In this chapter 4, Time Value of Money we discussed about Future Value, Present Value, Rates of return and Amortization. Future value is the value of an asset at a particular date that means a given sum of money is â€Å"worth† at a specified time in the future with certain interest. It is product of present value and accumulation function. Present value also known as Present Discounted value. It is less or equal to the future value because of money has interest rate. For example â€Å"A dollar today is worth more than a dollar tomorrow† because it can be invested and earn a day’s worth of interest so it makes more than a dollar tomorrow. A rate of return is measure of profit as a percentage of investment. Suppose I invest $500 in a business, and it†¦show more content†¦The important thing is Amortization refers intangible, Depreciation refers tangible and depletion refers to natural resources. CHAPTER 5 In chapter 5, Bonds, Bond Valuation, and Interest rates we discussed mainly about key features of Bonds, Bond valuation, measuring yield and Assessing risk. Generally Bonds are income investments, the bond’s issuer agrees to pay a certain rate of interest at regular intervals for a set period until the bond matures or the principal is repaid. The features are set maturity dates, Interest payments, Principal Investment Repayment, credit ratings, callable bonds, minimum investment. The benefits are reliable source of income, liquidity, and exempt from taxation, low risk. Bonds are classified into different type’s corporate bonds (money borrowed by institution or corporation), Municipal Bonds (are issued by states, countries, cities and local) and Us Government securities. Bond valuation is determines the fair value of a particular bond. It calculates the present value of the bond’s future interest payments (cash flow), and the bond’s value upon maturity, als o known as its face value or par value. Yield curve risk refers to the probability that the yield curve will shift in a manner that affects the values of securities tied to interest rates- particularly bonds. Also known as the term structure of interest rates, the yield curve is a graph that plots the yields of similar quality bonds against their maturities, ranging from shortest