Time
Value Of Money II...Continued
PV:
Present Value: The
value of a dollar today due in the future or in a series of
payments, to give an investor a certain yield over a period
of time.
FV:
Future Value: The value of a dollar
at some time in the future from a lump sum payment, or series
of payments. Simple example would be a balloon payment due
in 5 years, or how much would you have if you saved one dollar
a month for five years at 6% compound interest.
%i:
Yield: This
term is often interchanged with rate of return or interest.
N:
Number of pay periods: The
total number of periodic payments on a note. Usually in terms
of months. It can be years, quarterly, semi-annually, or even
weekly.
PMT:
Amount of payments:
The amount of dollars received or paid out in periodic
payments to achieve a certain rate of return, and to amortize
a loan.
When
one or more of these variables change, it changes the others.
The understanding of how theses variables relate, will give
you powerful tools that will increase
you wealth.
In
this issue, we are going to discuss N,
and how N relates
to the other variables, specifically PMT.
Although
N can be any pay
period, yearly, semi annually, weekly, or even bi weekly,
in this issue, we will be discussing monthly pay periods,
because it is the most common.
The
more pay periods, or the
larger N, the less PMT will be. The reverse is also true…the shorter N, the higher PMT….in
other words… N and
PMT have an inverse
relationship.
Is
there any doubt that
a 30 year amortized loan will have
lower payments than a 5 year amortized loan?
Likewise,
if we raise PMT,
N will become smaller.
By knowing this concept, you can tweak or rearrange notes
that will guarantee
large yields.
How
can I use this concept
in a practical application
to make me wealthy?
In
the EDUCATION
section, there are precise articles that give no nonsense
applications, to this principle. Note Professor™ will show
you how to increase
a 7% yield note into a 25% yield note
in the education article (link
to "education" section) INCREASE
YOUR YIELD BY LOWERING THE INTEREST. So you will know
how to easily calculate your yields click on the important education article
(link to "education"
section) HOW TO
DISCOUNT EVEN CASH FLOWS. The
Note Professor™ education articles will teach you realistic
ways to increase your yield, and your wealth.
Contact
the Professor,
with your comments or questions.
In
next month's issue, we will discuss the relationship between
N and Yield.
There
are Big Profits
to be made in understanding this relationship.
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