1. You place $5,000 in a savings account earning 2.50% interest compounded annually. How much will you have at the end of four years? How much would you have at the end of four years if interest is compounded semiannually?

If interest compounded annually I would have saved $5,519.06 at the end of four years. If interest compounded semiannually I would have saved $5,522.43 at the end of four years. 2. Change the interest rate to a higher rate. How much will you have at the end of four years if interest is compounded annually at a rate of 3%? How much would you have at the end of four years if interest is compounded semiannually?

If the interest compounded annually I would have saved $5,627.54 at the end of four years.

If the interest compounded semiannually I would have saved $5,632.46 at the end of four years.

3. Now change the interest rate to a lower rate. How much will you have at the end of four years if interest is compounded annually at a rate of 2%? How much would you have at the end of four years if interest is compounded semiannually?

If the interest compounded annually I would save $5,412.28 at the end of four years.

If the interest compounded semiannually I would save $5,412.16 at the end of four years.

4. You have $10,000 in credit card debt, at a 14% interest rate. When is it beneficial to pay off the debt vs. putting money in a savings account? Explain the pros and cons of either option. I think with a 14% interest rate is would be beneficial to pay off the debt instead of putting money in a savings account. I would pay it off as fast as possible because the cost would be after 1 year with 14% $11,449.00, and after four years $17,181l86. This would be a big lump sum of money I could save if I pay it off fast. Pros and cons of saving money: I would have some savings I could use as collateral when applying for loans and I also would gain interest on my savings. Interest rates on savings accounts are usually lower,...

...TimeValue of Money (TVM), developed by Leonardo Fibonacci in 1202, is an important concept in financial management. It can be used to compare investment alternatives and to solve problems involving loans, mortgages, leases, savings, and annuities.
TVM is based on the concept that a dollar today is worth more than a dollar in the future. That is mainly because money held today can be invested and earn interest.
A key concept...

...toward understanding the relationship between the value of dollars today and that of dollars in the future is by looking at how funds invested will grow over time. This understanding will allow one to answer such questions as; how much should be invested today to produce a specified future sum of money?
TimeValue of Money
In most cases, borrowing money is not free, unless it is a fiver for...

...one of the most important concepts is the TimeValue of Money (TVM). TimeValue of Money concepts helps a manager or investors understand the benefits and the future cash flow to help justify the initial cost of the project or investment. Many of the assets businesses and individuals own are financed with money borrowed from others, so the understanding of TVM is crucial to making good buying...

...TimeValue of Money
Exercise
1. If you invest $1000 today at an interest rate of 10% per year, how much will you have 20 years from now, assuming no withdrawals in interim?
2. a. If you invest $100 every year from the next 20 years starting one year from today and you earn interest of 10% per year, how much will you have at the end of the 20 years?
b. How much must you invest each year if you want to have $50000 at the end of the 20 years?...

...FINANCE
TIMEVALUE OF MONEY
The aim of this paper is to learn about time-value-of-money to make optimal decisions as manger must understand the relationship between a dollars present today and a dollar in the future.
Timevalue of money
Today’s financial managers often have to compare cash payments that occur on different dates. To make optimal decisions, the...

...ACFI 340 – TAKE HOME QUIZ - FALL, 2011
Below you will find a series of independent questions involving present value concepts. Show all factors used in present value computations and indicate the table that was used (FV of $1, PV of $1, etc). If you use a financial calculator, show the key strokes you used to compute the answer: N, i/y, PV, FV and PMT
Please download a copy of this quiz and type your answers after each question. Each student should design...

...TimeValue of Money
The timevalue of money (TVM) or, discounted present value, is one of the basic concepts of finance and was developed by Leonardo Fibonacci in 1202. The timevalue of money (TVM) is based on the premise that one will prefer to receive a certain amount of money today than the same amount in the future, all else equal. As...

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