## Eto k 1 yk ZU

ELo k 1 y J 149226.50 2 -E Lo 1 y -k h i Ckh 2 x 30165'55 That the two methods are equivalent is seen from the following. m E h i E n o rkh i y -k Ej i ELo C 1 y -k m Eh i En o rkh 1 y -k En o k 1 y -k Ej i Ck m E n o 1 y Eh i Ckh 8.1. Construct a bond amortization schedule, similar to that shown in Table 8.1 on p. 118, for a 9 noncallable bond with 2 years to maturity and a face value of 1,000 if the yield to maturity is 12 and the coupons are paid semi-annually. 8.2. How can you tell from...

## Simple Interest

Would you prefer to have 100 now or 100 a year from now Even though the amounts are the same, most people would prefer to have 100 now because of the interest it can earn. Thus, whenever we talk of money we must state not only the amount, but also the time. This concept that money today is worth more than the same amount of money in the future is called the time value of money. The present value of an amount is its worth today, while the future value is its worth at a later time. These topics...

## T

2.3 Internal Rate of Return 2,100 3,223.60 2,000 1,000 2,000 Fig. 2.9. Decomposition of time diagram Figure 2.9 shows how to decompose Fig. 2.8. Because the interest rates changed during the investment period, a natural question to ask is, What rate have we really been earning over the two years We cannot use the annual effective rate ieff because that applies only to investments that earn a constant rate of return. One way to answer this question is to say that we made 223.60 on an investment...