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What effect do interest rates have on the calculation of future and present value, how does the length of time affect future and present value, how do these two factors correlate.

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14y ago

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How do you calculate the value of a bond?

The value of a bond is calculated by adding up the present value of its future cash flows, which include periodic interest payments and the bond's face value at maturity. This calculation takes into account factors such as the bond's interest rate, time to maturity, and the current market interest rates.


Which of the following factors will change when interest rates change?

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What is the difference between present value interest factors versus future value interest factor?

The Present Value Interest Factor PVIF is used to find the present value of future payments, by discounting them at some specific rate. It decreases the amount. It is always less than oneBut, the Future Value Interest Factor FVIF is used to find the future value of present amounts. It increases the present amount. It is always greater than one.


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To use Google Sheets for interest calculation, you can utilize the formula PMT(rate, nper, pv) to calculate the monthly payment on a loan. You can also use the formula FV(rate, nper, pmt, pv) to calculate the future value of an investment with compound interest. Additionally, you can use the formula PV(rate, nper, pmt, fv) to calculate the present value of an investment.


Why the calculation of present value is important in decision making?

When calculating any return on investment or the amount to be spent on a project, you have to do the calculation using the present value of any spending or income to be received, in order to calculate it without the effect of interest or any other event that might effect the inflow or outflow. Only by using the present value of the amounts do you have common ground to compare the options or to calculate the true value of the income.


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Student Loan Payment Calculation: Reasons to Do a Calculation?

There are many reasons a person should do a student loan payment calculation. Doing this sort of calculation can help a person to save thousands of dollars over the course of an educational experience. Without doing this sort of calculation, a person can end up taking out extra loans due to unnecessary spending. If a student knows how much he or she will need to eventually repay in loans, then he or she may be more frugal in the present time. A person may not spend as much money during his college years with a good understanding of the interest he or she will owe.


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