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Analytical Methods for Lawyers (Finance)

Analytical Methods for Lawyers (Finance). Future value [last updated 6 Apr 09]. “The most powerful force in the universe is compound interest”. Value of $1000?. I offer you either $500 today or $800 in three years. Which is better?. Time value of money. Time value of money.

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Analytical Methods for Lawyers (Finance)

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  1. Analytical Methodsfor Lawyers (Finance) Future value [last updated 6 Apr 09]

  2. “The most powerful force in the universe is compound interest”.

  3. Value of $1000?

  4. I offer you either $500 today or $800 in three years. Which is better?

  5. Time value of money

  6. Time value of money $800 in 3 years > $500 today (assuming a 10% rate for money)

  7. Time value of money

  8. Time value of money $500 today > $800 in 3 years (assuming a 20% rate for money)

  9. Time value of money $500 * (1+ .20)3 = $864

  10. Future value FV = PV * (1+ i)n 7 6 FV 5 4 3 2 0 1 PV

  11. Which is better investment?

  12. Example How much would a 5-year zero coupon bond face amount $10,000 at 2.5% interest (compounded annually) pay at maturity? Solution

  13. What is FV ofdollar cost averaging? (an annuity - $5,000 for 10 years @ 7%) Law & Valuation 1.2.3 “Future value of annuity”

  14. The end

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