Foundations and Applications of the Time Value of Money. Frank J. Fabozzi Series

  • ID: 1084040
  • Book
  • 320 Pages
  • John Wiley and Sons Ltd
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Understanding financial transactions whether involving investing, borrowing, or lending requires an understanding of the time value of money (TVM), as well as the financial mathematics that go along with it. And while TVM is an essential aspect of finance, there aren′t many resources that take the time to fully explain it.

In this book, the experienced author team of Pamela Peterson Drake and Frank Fabozzi fully expand upon the type of TVM concepts usually presented as part of an overview given in other general finance books. Throughout these pages, various TVM concepts and principles are discussed, with the authors offering examples in each chapter 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 included in an appendix, to familiarize you with basic terms.

Divided into two comprehensive parts The Basics of the Time Value of Money and A Few Applications this comprehensive guide can help you analyze almost any financial transaction and evaluate cash flows to determine values at different points in time or returns on investments. Written with both the aspiring and experienced financial professional in mind, Foundations and Applications of the Time Value of Money:

  • Deals with the compounding and discounting of lump sums translating single values through time
  • Shows how valuing series of cash flows is a simple extension of discounting or compounding lump sums
  • Demonstrates how to calculate the annual percentage rate, the effective annual rate, and the internal rate of return for financial transactions
  • Looks at loans and how they may be amortized
  • Focuses on deferred annuities which are typically used within the retirement arena and other "saving–for–future–spending" scenarios in which there is more than one withdrawal of funds in the future
  • Addresses the valuation of stocks and bonds using TVM mathematics

Rounding out this detailed discussion, Peterson Drake and Fabozzi examine the applications of the TVM mathematics with regard to: evaluating whether to get an MBA, deciding whether to lease or buy a car, and whether gold is a good investment. And while this is not a personal finance book, the authors chose examples that might interest you in immediately applying the techniques outlined here.

Making more informed financial decisions relies on a firm grasp of the time value of money. This book has the insights and advice needed to achieve such a goal.

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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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