Assume you deposit $10,000 today in an account that pays 6% interest. How much will you have in five years?

= $10,000 (FVIF of 6%, 5years)

= $10,000 * 1.3382

= $13,382

Calculating Present Values

Suppose you have just celebrated your 19th birthday. A rich uncle has set up a trust fund for you that will pay you $150,000 when you turn 30. If the relevant discount rate is 9%, how much is the fund worth today?

We know,

Present Value = Future Cash Flow / (1 + Required Rate of Return) ^Number of Years You Have To Wait For The Cash Flow

Given,

Present value = $150,000 / (1 + .09) ^ 11

= $150,000 / 2.5804

= $ 58,130

Therefore,

The present value is thus about $58,130.

Calculating Rates of Return

You’ve been offered an investment that will double your money in 10 years. What rate of return are you being offered? Use the Rule of 72 to calculate the answer.

Suppose, we spend $1,000, than according the question the money will be double in 10 years which will $2,000. So,

Present value = $1,000

Future Value = $2,000

Time = $ 10 year

$2,000 = $1,000 * (1 + r)^10

2 = (1 + r) ^10

2(1/10) = 1 + r

r = 7.18%

For each of the following, compute the future value:

Present ValueYearsInterest RateFuture Value

$2,2501110% $6419.51

$8,74278% $14,982.25

$76,3551417% $687,764.17

$183,79687% $315,795.75

For each of the following, compute the present value:

...Rita Collins
FIN 501- Strategic Corporate Finance
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T.U.I
According to Wikipedia.com, “Present value is the value on a given date of a future payment or series of future payments, discounted to reflect the timevalue of money and other factors such as investment risk. Present value calculations are widely used in business and economics to provide a means to compare...

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The Present and Future Price of Money
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One of the most important concepts about saving and investing is the timevalue of money. It can be used to compare investment alternatives and to solve problems involving loans, mortgages, leases, savings, and annuities. This means money paid out or...

...concept of the timevalue of money and the importance of this concept in business. Also, we will provide a demonstration of the use of the formula used to calculate the present and future values of money to get the present value of $100 using different periods of time and interest rates.
TimeValue of Money
In the world of business, it is essential...

...Introduction
The timevalue of money 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. The timevalue of money can be defined as the value of money received today instead of in the future. This is based on the premise that cash in hand...

...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...

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TIMEVALUE OF MONEY (CHAPTER 4)
1. Future value (FV), the value of a present amount at a future date, is calculated by applying compound interest over a specific time period. Present value (PV), represents the dollar value today of a future amount, or the amount you would invest today at a given interest rate for a specified time period to equal the future amount....

...Timevalue of money ("TVM") is defined as the idea that money available at the present time is worth more than the same amount in the future, due to its potential earning capacity. This core principle of finance holds that, provided money can earn interest, any amount of money is worth more the sooner it is received. TVM is also often referred to as "present discounted...

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Vadim di Pietro
Assignment 1: Solutions
Topic: Timevalue of money: Retirement savings problem
[pic]
1) Today is July 1, 2010. You just graduated university. You plan to take a year off to travel and then start work one year from today. Your first monthly salary of $5,000 will be paid on August 1, 2011. Assume your monthly salary will increase by 0.8% each month thereafter, until you retire....

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