Acct. 221 1st Edition Lecture 18Outline of Last Lecture 1. Contingent Liabilities a. Probable and estimableb. Reasonably possiblec. Remote 2. Warranty Obligations 3. Current Ratio4. Investments and Securities Outline of Current Lecture 1. Time value of Money2. Interesta. Singleb. Compound 3. Time Value Tables Current Lecture Time value of money Future value an present value applications are based on the simple truth A dollar bill is worth more now that in the future Why?- You can invest a dollar now and earn interest as time passes Interest Return you receive on investing your moneyThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute. You are actually “lending” your money, so you re paid for letting someone else use your money - Ex. I = P x R x T $10,000 @ 10 % for 3 years Interest = $3,000 Compound interest The interest that your investment earns on the principal and interest your investment previously earned. - Ex. Year 1 = $10,000 + 1,000 = 11,000- Year 2 = 11,000+1,100 = 12,100- Year 3 = 12,100 + 1,210 = 13,310 Time Value Tables See App. F. This had all the tables you will need for the HW.- Future Value of a Single $1 (adds interest) 4 things: Interest rate and time = given Principal and future value = one given The future value of 14,00 @ 8% for 10 years- Present Value of a Single $1 ( discounts or subtracts interest)- Future Value of an Annuity (multiple $1)- Present Value of an Annuity (multiple $1) May be asked to find payment or deposits, only use FVA or
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