Chapter 7

Time Value of Money

Interest, Bonds, Money Market Funds

Abstract

Credit markets provide a huge amount of capital to businesses and governments alike. In terms of dollar value, credit markets are much larger than equity markets. It is important, therefore, to have a framework for understanding these markets and to be aware of current and future products and services in fixed income. There are two related concepts that provide consistent measurement of the returns from different payment streams: Future Value quantifies what an investment will be worth a specified time in the future, and Present Value quantifies the current worth of future investment results. Internal Rate of Return can be used to rank diverse projects. Types of debt instruments ...

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