Chapter 2 Present Value and Sinking Funds

The last chapter presented a few basic formulas. The accumulation of interest for a single deposit answers the question, “How much will a single sum grow over a period of time, given a known rate of interest and compounding method?” The accumulation of a series of deposits is a variation.

This chapter tackles more complex formulas and answers a different but equally important set of questions. The concepts of present value and sinking fund payments are based on knowing the desired result and determining how much you need to deposit today to achieve that balance. For managers, present value calculations are likely to be more pressing than tracking savings accounts. For example, if you need to set aside ...

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