SESI 2 NILAI WAKTU UANG

Summary

This presentation covers the concept of the time value of money (TVM), explaining its importance in various financial planning aspects such as retirement funds, loan repayments, investments, and corporate decision-making. The speaker provides examples, such as the change in the value of money over time, and explains the use of methods like future and present value calculations, annuities, and perpetuities. The session aims to make these financial concepts understandable, offering practical insights for both personal and business finance management.

Takeaways

• 😀 Time has a direct impact on the value of money, as demonstrated by the changing value of pocket money over a few years.
• 😀 Understanding the concept of the time value of money helps in planning retirement funds, managing loan schedules, valuing stocks and bonds, and making business decisions.
• 😀 Financial planning for pensions, loan repayments, and investments involves calculating both present and future values over specific time periods.
• 😀 The time value of money can be applied to pensions through a timeline method that involves calculating future values and present values, with yearly or other periodic intervals.
• 😀 Annuities are a key concept in calculating pension plans, with regular payments made over time at consistent intervals. There are two types of annuities: ordinary annuities and annuities due.
• 😀 The formula for calculating the future value of an annuity involves adding the payment (PMT) with a compounded interest rate over the time periods.
• 😀 Perpetuities involve payments that continue indefinitely, such as bonds. The value of these financial instruments is sensitive to changes in interest rates.
• 😀 The price of bonds tends to fall when interest rates rise and vice versa, as demonstrated in the example with a UK government bond.
• 😀 When calculating the present value of a perpetuity, the formula involves dividing the payment by the interest rate, with no future value calculation required.
• 😀 Cash flow can either be uniform (same amount at regular intervals) or non-uniform (variable amounts), and different formulas apply to calculate their present and future values.

Q & A

What is the basic concept of time value of money (TVM) introduced in the video?

The basic concept of time value of money (TVM) is that the value of money changes over time. An example provided was how 10,000 IDR in the past may not have the same purchasing power today, which shows how the value of money decreases as time progresses.

How does understanding TVM help in financial planning?

Understanding TVM is crucial for planning things like retirement funds, managing loan payments, assessing stocks and bonds, and making business decisions, as it helps forecast future values and current worth of financial resources.

What are the primary applications of TVM in business decisions?

TVM is used in business for planning retirement funds, managing loan installments, evaluating stocks and bonds, and making strategic decisions such as investment planning or budgeting.

What is the significance of a timeline in TVM calculations?

A timeline is essential in TVM calculations because it visually represents the progression of time, making it easier to calculate present values and future values over multiple periods, such as yearly, quarterly, or monthly intervals.

What is the difference between present value (PV) and future value (FV) in TVM?

Present Value (PV) is the current value of a sum of money that will be received or paid in the future, while Future Value (FV) is the amount that a current sum of money will grow to in the future, factoring in interest or inflation.

Can you explain the concept of annuity as discussed in the video?

An annuity refers to a series of equal payments made at regular intervals. The video discussed both ordinary annuities (payments made at the end of each period) and annuities due (payments made at the beginning of each period).

What are the two types of annuities mentioned in the script, and how are they different?

The two types of annuities mentioned are 'ordinary annuities' and 'annuity due.' The main difference is in the timing of the payments: ordinary annuities make payments at the end of each period, while annuity due makes payments at the beginning of each period.

How is perpetuity related to bonds in the context of TVM?

Perpetuity refers to a series of payments made at regular intervals forever. This concept is particularly relevant in bonds, where some bonds make fixed payments (coupon payments) indefinitely. The script mentioned how bond prices change as interest rates fluctuate, with the present value of perpetuities affected by changes in interest rates.

What happens to bond prices when interest rates change, as explained in the video?

When interest rates rise, the price of existing bonds generally falls, and when interest rates fall, the price of existing bonds tends to rise. This is because the fixed coupon payments become more or less attractive compared to new bonds issued at the current rate.

Why is it important to use correct time periods (like annual, semi-annual, or monthly) in TVM calculations?

It is important to adjust time periods in TVM calculations because different time frames (annual, semi-annual, monthly) affect how interest is compounded and how payments are scheduled. For example, interest rates applied on a semi-annual or monthly basis will differ from those applied annually.