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Foundations and Applications of the Time Value of Money

ISBN: 978-0-470-52602-6
384 pages
July 2009
Foundations and Applications of the Time Value of Money (0470526025) cover image

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.

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Preface.

About The Authors.

Introduction.

Part 1: The Basics Of The Time Value Of Money.

Chapter 1: The Value Of Compounding.

Compounding.

Calculator And Spreadsheet Solutions.

Frequency Of Compounding.

Chapter 2: Don't Discount Discounting.

Discounting.

Discounting More Than On Future Value.

Determining The Number Of Compounding Periods.

Chapter 3: Cash Happens.

Valuing A Stream Of Future Cash Flows.

Valuing A Perpetuity.

Annuities.

Chapter 4: Yielding For Yields.

Annualized Rates Of Interest.

Determining The Unknown Interest Rate.

Rules.

Part 2: A Few Applications.

Chapter 5: Loans: To Amortize Or Not To Amortize.

Amortizing A Loan.

Interest Rates On Loans.

Determining The Number Of Periods.

Variations On The Theme.

Chapter 6: Saving To Spend.

Valuing A Deferred Annuity.

Annuities With Annuities.

A Bit Of Realism.

Chapter 7: Values Tied To Bonds.

Bond Basics.

Calculating The Yield To Maturity.

Issues.

Chapter 8: Taking Stock.

What's In A Value? The Basics Of Stock Valuation.

Returns On Stocks.

Chapter 9: A Capital Idea.

The Net Present Value.

The Profitability Index.

The Internal Rate Of Return.

Chapter 10: Fact Or Fiction.

Fact Or Fiction: It Pays To Get An MBA.

Fact Or Fiction: Leasing A Car Accosts Less Than Buying A Car.

Fact Or Fiction: Gold Has Always Been A Good Investment.

Appendices.

Appendix A: Using Financial Calculators.

Preparing The Calculator.

The Basics.

Financial Functions.

Tips.

Troubleshooting.

Appendix B: Using Spreadsheets For Financial Calculations.

The Basics.

Time Value Of Money Functions.

Cash Flow Functions.

Other Useful Functions For Financial Mathematics.

Appendix C: Formulas.

Appendix D: Glossary.

Appendix E: Solutions To End-Of-Chapter Problems.

Index.

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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.

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