A.Q. Joe won a lottery jackpot that will pay him $12,000 each year for the next ten years. If the market interest rates are currently 12%, how much does the lottery have to invest today to pay out this prize to Joe over the next ten years?

A.
If prize = (principal) x (rate) x (time)
prize = (12,000) x (0.12) x (10)
prize = (12,000) x (1.2)
prize = $144,000 total invested by the lottery to pay our winnings of 12,000 for the next ten years.

B.Q. Mary Just deposited $33,000 in an account paying 10% interest. She plans to leave the money in this account for seven years. How much will she have in the account at the end of the seventh year?

A.
Traditional method of finding the Future Value:

FV end of year 1 = $33,000+0.10($33,000) = $36,300
FV end of year 2 = $33,000+0.10($36,300) = $39,930
FV end of year 3 = $33,000+0.10($39,930) = $43,923
FV end of year 4 = $33,000+0.10($43,923) = $48,315.30
FV end of year 5 = $33,000+0.10($48,315.30) = $53,146.83
FV end of year 6 = $33,000+0.10($53,146.83) = $58,461.513
FV end of year 7 = $33,000+0.10($58,461.513) = $64,307.6643

C.Q. Mary and Joe would like to save up to $10,000 by the end of three years from now to buy new furniture for their home. They currently have $2500 in a savings account set aside for the furniture. They would like to make equal year end deposits to this savings account to pay for the furniture when they purchase it three years from now. Assuming that this account pays 8% interest, how much should the year end payments be?

A.
Current savings alone with .08% interest after three years would equal $3149.28, a $6850.72 difference in what is needed to bring Mary and Joes savings to $10,000.

...TimeValue of Money
“Money has a timevalue associated with it and therefore a dollar received today is worth more than a dollar to be received in the future” (Block, Hirt, 2005). The timevalue of money may be based on the concept that one would prefer to receive a fixed payment today rather than the same fixed payment at a future date. This paper discusses some of...

...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...

...Running Head: TimeValue of MoneyTimeValue of Money
University of Phoenix
Believe it or not many people through out the years thought that by putting money to the side, under the mattress or, even in the cookie jar that eventually one day they would be rich. Well not to spoil the surprise but the years it would take to make one rich by those means are far off and...

...TimeValue of Money
The timevalue of money relates to many activities and decision in the financial world. “Understanding the effective rate on a business loan, the mortgage payment in a real estate transaction, or the true return on an investment depends on understanding the timevalue of money” (Block, Hirt, 2005). The concept of time...

...TIMEVALUE OF MONEYTimevalue of money is useful in making informed business decisions. For example the "net present value method" can be used to help decide the best alternative among multiple alternative uses of a firm or personal financial resources. By discounting various alternatives to their "present value" one can compare the alternatives. Time...

...Finance21
Prof. Khen Enriquez
This article will explain the financial concept of timevalue of money. The overview provides an introduction to the principles at work when money grows in value over time. These principles include future value of money, present value of money, simple interest and compound interest. In addition, other concepts that...

...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 today is more...

1431 Words |
5 Pages

Share this Document

{"hostname":"studymode.com","essaysImgCdnUrl":"\/\/images-study.netdna-ssl.com\/pi\/","useDefaultThumbs":true,"defaultThumbImgs":["\/\/stm-study.netdna-ssl.com\/stm\/images\/placeholders\/default_paper_1.png","\/\/stm-study.netdna-ssl.com\/stm\/images\/placeholders\/default_paper_2.png","\/\/stm-study.netdna-ssl.com\/stm\/images\/placeholders\/default_paper_3.png","\/\/stm-study.netdna-ssl.com\/stm\/images\/placeholders\/default_paper_4.png","\/\/stm-study.netdna-ssl.com\/stm\/images\/placeholders\/default_paper_5.png"],"thumb_default_size":"160x220","thumb_ac_size":"80x110","isPayOrJoin":false,"essayUpload":false,"site_id":1,"autoComplete":false,"isPremiumCountry":false,"userCountryCode":"NL","logPixelPath":"\/\/www.smhpix.com\/pixel.gif","tracking_url":"\/\/www.smhpix.com\/pixel.gif","cookies":{"unlimitedBanner":"off"},"essay":{"essayId":33185425,"categoryName":null,"categoryParentId":null,"currentPage":1,"format":"text","pageMeta":{"text":{"startPage":1,"endPage":2,"pageRange":"1-2","totalPages":2}},"access":"premium","title":"Time Value of Money","additionalIds":[],"additional":[],"loadedPages":{"html":[],"text":[1,2]}},"user":null,"canonicalUrl":"http:\/\/www.studymode.com\/essays\/Time-Value-Of-Money-143867.html","pagesPerLoad":50,"userType":"member_guest","ct":10,"ndocs":"1,500,000","pdocs":"6,000","cc":"10_PERCENT_1MO_AND_6MO","signUpUrl":"https:\/\/www.studymode.com\/signup\/","joinUrl":"https:\/\/www.studymode.com\/join","payPlanUrl":"\/checkout\/pay","upgradeUrl":"\/checkout\/upgrade","freeTrialUrl":"https:\/\/www.studymode.com\/signup\/?redirectUrl=https%3A%2F%2Fwww.studymode.com%2Fcheckout%2Fpay%2Ffree-trial\u0026bypassPaymentPage=1","showModal":"get-access","showModalUrl":"https:\/\/www.studymode.com\/signup\/?redirectUrl=https%3A%2F%2Fwww.studymode.com%2Fjoin","joinFreeUrl":"\/essays\/?newuser=1","siteId":1,"facebook":{"clientId":"306058689489023","version":"v2.8","language":"en_US"},"analytics":{"googleId":"UA-32718321-1"}}