How is the present value of a single future amount calculated?

$PV=FV/(1+r)^n$, where $r$ is the rate per period and $n$ is the number of periods.

What does the NPER function calculate for a single lump sum?

The number of periods needed to move between present and future values at a specified rate.

What does the RATE function calculate for a single lump sum?

The periodic rate that connects present and future values over a known number of periods.

What is hard coding in a spreadsheet formula?

Placing numerical inputs directly in the formula instead of referring to cells.

What is the cash flow sign convention in financial calculators?

Cash paid out is entered as negative, while cash received is entered as positive.

FinanceLesson 3 of 4 in the course Time Value of Money I: Single Payment Value

Single-Sum Time Value of Money: Formulas, Calculators, and Excel

5 flashcards · 5 quiz questions · 5 match pairs · 5 fill-in sentences · English

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Summary

This lesson introduces timelines as a way to organize time value of money (TVM) information and explains how a single amount grows into the future.

A timeline is a visual representation of periods and cash flows. It normally places today at the left, at time 0, and the ending date at the right. Periods and known amounts are then marked at the appropriate points.

All flashcards

How is the present value of a single future amount calculated?: $PV=FV/(1+r)^n$ , where $r$ is the rate per period and $n$ is the number of periods.
What does the NPER function calculate for a single lump sum?: The number of periods needed to move between present and future values at a specified rate.
What does the RATE function calculate for a single lump sum?: The periodic rate that connects present and future values over a known number of periods.
What is hard coding in a spreadsheet formula?: Placing numerical inputs directly in the formula instead of referring to cells.
What is the cash flow sign convention in financial calculators?: Cash paid out is entered as negative, while cash received is entered as positive.

Quiz questions

Which formula calculates the present value of a single future amount?Answer: $PV=FV/(1+r)^n$
On a financial calculator, which TVM key represents the number of periods?Answer: N
For an investor's single-sum investment, which signs ordinarily represent the initial deposit and future proceeds?Answer: The deposit is negative and the proceeds are positive.
In Excel's FV function, what should the pmt argument be for a single lump-sum investment with no periodic payments?Answer: Zero
If the target future amount stays fixed but the investment horizon becomes shorter, what generally happens to the required growth rate?Answer: It must be higher.

Based on Principles of Finance by Julie Dahlquist, Rainford Knight (OpenStax), licensed CC BY 4.0. Adapted into a summary, flashcards and quizzes.

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