金融英语 李丽等 对外经贸大学

Money represents purchasing power
The willingness to postpone purchases into the future is a function of the reward—that is interest rate
THE TIME VALUE OF MONEY
Present value= future value of the payment divided by (one plus the interest rate)
FV PV = (1 + i )
Generally ,
F Vn PV = n (1 + i )
THE TIME VALUE OF MONEY---PRESENT VALUE
39091103 李 莹 39092202 李洋颀 39091102 高玉娟
Introduction
Interest rates are among the most closely watched variables in the economy. They affect personal decisions as well as the economic decisions of business and households
CONCEPTION
Essence of Interest
The fee charged by a lender to a borrower for the use of borrowed money, usually expressed as an annual percentage of the principal.
r = i −π e
INDEX
Conception Time Value of Money Real and Nominal Interest Rates
REAL AND NOMINAL INTEREST RATES Nominal Interest Rate: The rate of interest prior to taking inflation into account.
F V = P V + F V × i = P V × (1 + i )
THE TIME VALUE OF MONEY---COMPOUNDING : FUTURE VALUE
Years into future 1 2 3 4 5 6 7 8 9 10 Computation
$100 × (1.05)
REAL AND NOMINAL INTEREST RATES
Inflation Monetary phenomenon
Too much money in the market
Money devalued
REAL AND NOMINAL INTEREST RATES
ate: Real Interest Rate: the interest rate adjusted by subtracting the inflation rate. It’s the growth rate of purchasing power derived from an investment. By adjusting the nominal interest rate to compensate for inflation, you are keeping the purchasing power of a given level of capital constant time.(From Investopedia) over time.(From Investopedia)
REAL AND NOMINAL INTEREST RATES
The Fisher equation is:
This means, the real interest rate equals the nominal interest rate minus expected rate of inflation
Future value $105.00 $110.25 $115.76 $121.55 $127.63 $134.01 $140.71 $147.75 $155.14 $162.89
$100 × (1.05) 2 $100 × (1.05)3 $100 × (1.05) 4 $100 × (1.05)5 $100 × (1.05)6 $100 × (1.05)7 $100 × (1.05)8 $100 × (1.05)9 $100 × (1.05)10
Interest is a product of time preference. 利息是时间偏好的产物 Interest actually is a part of profit, a special from of converted surplus values 利息是利润的一部分，是剩余价值的特殊转化形式。
Interest is derived from value differences between goods in present and goods in the future.
In real-life, we’ve to estimate real interest rate by turning the Fisher equation around:
Computing the future value of $100 at 5% annual interest rate
THE TIME VALUE OF MONEY---COMPOUNDING : FUTURE VALUE
Using the computation ,we can derive a general formula for the future value.
For the long run, if the real interest rate has the same change as the nominal interest rate, the inflation rate may remain unchanged
CONCLUSION
Interest rates directly affect our everyday lives and have important consequences on the health of the economy.
F V n = P V × (1 + i ) n
THE TIME VALUE OF MONEY---PRESENT VALUE
Present value is the value in the present of the
payment that is promised to be made in the future.
THE TIME VALUE OF MONEY
来自百度文库
The time value of money :
The interest rate represents the time value of money . It specifics the terms upon which one can trade off present purchasing power for future purchasing power.
INDEX
Conception Time Value of Money Real and Nominal Interest Rates
THE TIME VALUE OF MONEY
Compounding : future value Present value
THE TIME VALUE OF MONEY
INDEX
Conception Time Value of Money Real and Nominal Interest Rates
CONCEPTION
Principal is the amount of credit extended when one makes a loan or purchases a bond. Interest is the payment by the issuer of a financial instrument that compensates the purchaser for the use of their funds. Interest rate is the amount of interest expressed as a percentage of the principal.
The people who want to purchase goods and services but is short of the necessary funds having two options :
Borrow now and purchase now
Save now and purchase later
Present value allows us to figure out today’s value of a credit market instrument at a given simple interest rate I by just adding up the individual present value of all the future payments received. It allows us to obtain an equivalent measure of the interest rate on all types of credit market instruments.
INFLATION AND INTEREST RATE
Usually, the real interest rate is unchanged. As a result, the nominal interest rate and the inflation rate will be changed in the same direction
THE TIME VALUE OF MONEY---COMPOUNDING : FUTURE VALUE
Future value is the value on some future date of
an investment made today
$100 Present value of the investment +$100*(0.05) +Interest =$105 =Future value in one year