Posts tagged with 'tvm'


Calculating the Net Present Value for the Tesla solar roof…

…in which your blogger finds he has to take several deep breaths at the sheer vacuity and cluelessness of an anti-Tesla-solar-roof guy who tries to use a Net Present Value calculation to show that said solar roofing is not worth it. In essence, he’s saying, “I think it’s crap, ergo I’ll fudge something I don’t understand to show I’m right.” <another deep breath> Let’s see what the issue is. There’s an article on Inverse (not a site I’ve come across before) that discusses how much one of Tesla...

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More TVM–calculating the IRR

My insurance company allows me to pay for our car insurance by monthly premiums instead of the usual premium once every 6 months. For this option, they just divide the total six-monthly premium by six to give the monthly premium, and then charge a $5 “processing fee” per month on top. I decided to take a look at how much this actually cost me. (For background on the Time Value of Money – TVM – see parts 1 and 2 .) Let’s say, for sake of argument, that our total car insurance...

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Time Value of Money (part 2)

Last time we discussed that money has a time component to it, that it changes value with time. We derived the basic formula for TVM ( Time Value of Money ): \[ P_N = P_0(1 + i)^N \] That is, the future value (FV) after N periods is equal to the present value (PV) multiplied by a geometric factor depending on the interest rate. Let’s explore. Suppose you went to a bank and said you wanted a $1000 loan repayable in one payment after a year. The bank offers you 6% per annum. How much would your...

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Time Value of Money (part 1)

Back in a previous life, I used to write swaps and options software for traders and brokers. Of all my jobs, I’d have to say that writing this kind of software was practically the only one that utilized my mathematics degree to any great extent, which I must admit is kind of depressing in a way. You’d think that programming is all about mathematics but, in reality, not so much. Sure, understanding lambda calculus is all very well, but you tend not to have to use it in your day-to-day...

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