An introduction to the time value of money and the effects of differing interest rates and periods of payment for both simple and compound interest. Time cash flow diagrams are developed and the theory of annuities is presented.
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Upon successful completion, the student will be able to:
Module 1 - Simple Interest
Convert percent rates to their correct fractional form.
Determine the time period in a simple interest calculation under a variety of ways of stating loan periods.
Describe the linear behavior of simple interest.
Calculate the value for any variable in a simple interest model given sufficient data on the other variables.
Construct cash flow diagrams from text descriptions and use these to obtain solutions to problems.
Module 2 - Applications of Simple Interest and Discounting
Setup and solve the equations of value.
Understand what is meant by a negotiable instrument and specifically the nature of notes and drafts.
Understand the terminology of promissory notes (maturity, date, legal due date, days of grace).
Describe the difference between simple discount and bank discount and perform the necessary calculations from text descriptions.
Determine final balances in partial payment plans.
Module 3 - Compound Interest
Understand the difference between simple interest and compound interest.
Determine the interest rate per period and number of conversion periods from any nominal annual rate and loan duration.
Apply the compound interest formula to determine present values, future values, interest rates per period and nominal annual rates, number of compounding periods, or loan duration from text descriptions.
Apply correctly the techniques for determining present and future values under fractional periods of compounding.
Convert nominal interest rates to effective rates.
Find equivalent interest rates.
Set-up and solve for financial equivalence using compound interest.
Module 4 - Simple Case Annuities
Describe the characteristics of annuities.
Calculate the payment size, present value, future value, interest rate, or a number of payments for simple annuities due (beginning of period annuities).
Module 5 - Other Type Annuities
Apply the ordinary annuity model to solve for parameters or deferred annuities.
Recognize the general or complex case annuity and to solve for parameters of this type of annuity.
Solve for parameters of the perpetual annuity.
Find capitalized costs and apply these in financial evaluation.
Find final odd-sized payments in annuities.
Effective as of Fall 2003
TSYH 4720 is offered as a part of the following programs:
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