Time Value of Money
According to the simple calculator on Bankrate.com, if I place $5000 in a saving account earning 2.50% Interest compounded at the end of a four year span I would have $10,558.93 accumulated in my account. Setting the annual interest option to semi-annual I would have $10,563.82. This is a difference of $4.89. Setting the annual interest rate to 3% compounded annually I would have $10,716.56 in a four year span. Setting the Annual interest option to semi-annual I would have accumulated $10,723.70 in four years. A difference of $7.14. Setting the interest rate to 2% the calculator states. You would have $10,403.27 for annually compounded interest. And $10,406.36 for semi-annual in a four year span. A difference of $3.09. I find it incredible how a fraction of a percent interest will affect your finances.

Considering there is a small amount of interest earned on a savings account the best thing would be to pay off the debt ASAP. The circumstances here are the rate of interest on both the credit card, the savings account and the rate of inflation. The rate of inflation makes the value of money lower over time. You also have to factor in how much money you can earn in interest in the savings account before you must pay off the bill. Earning interest on the savings account is most suitable until you have to pay the balance off at the last possible day. For example the interest rate on the savings account was greater than 14% then it would be more desirable to earn the interest as long as the inflation rate did not devalue the money. If you had a huge sum of money in the saving account and you gained more interest than you pay on your debt, then paying off your debt wouldn’t be as much of a priority.

Note: The simple savings calculator on Bankrate.com would not let me uncheck or enter a 0 for the monthly deposit option. All calculations above are based on an initial balance of $5.000 and a monthly payment of $100. The Class syllabus says...

...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 a result, when one deposits money in a bank account, one demands (and earns) interest. Money received today is more valuable than money received in the future by the amount of interest we can earn with the money. If $90 today will accumulate to $100 a year from now, then the present value of $100 to be received one year from now is $90.
To fully understand timevalue of money one must first understand a few terms. Present value and future value are totally different. They also have their disadvantages and advantages; it just depends on how they are used. Of course, present value is what you have right now at this present time. While future value is the amount of money you will have at a given time in the future. Future value has a tendency to be deep;...

...Week 5 Assignment 1
TimeValue Of Money
FP/101 Janie Wainscott
If I placed $5,000.00 in a savings account earning 2.50% interest compounded annually. How much would you have at the end of four years? How much would you have if the interest is compounded semi-annually?
Annually, in four years, I would have a final savings balance of $13,078.86. If my interest was compounded semi-annually of $13,084.52. That is a difference of $5.66. So, there is little difference in making payments annually or semi-annually.
If I changed the interest rate, to a higher rate of 3% interest, I would have a final savings rate of $13,269.32 semi-annually and $13,261.06 annually. That is a difference of $8.26, still showing little difference in using annually and semi-annually payments.
If I changed the interest rate, to a lower rate of 2% interest, I would have a final savings rate of $12,902.40 semi-annually and 12,898.82 annually. That is a difference of $3.58. Showing the difference is still low in semi-annul and annual payments.
Since there is little interest earned on a savings account, the best thing is to pay off the debt. The factors involved here are the rate of interest on both credit cards and savings account, with the rate of inflation, (Inflation makes the value of money lower over time), You have to consider how much money you earned in interest in the savings account before...

...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 valuable than the same amount in the future due to its capability of earning interest. For investors, this is single most important concept in the world of finance. This paper will discuss the different financial applications of the timevalue of money. This paper will also describe the components of interest and highlight various methods of calculating timevalue of money using different interest scenarios.
Financial Applications of the TimeValue of MoneyTimevalue of money has many useful applications. One of the most important uses is that it helps to measure the trade-off in spending and saving. This can have important consequences for your personal budgeting. If market interest rates are at 5%, one may decide that the timevalue of money is greater in the future, and...

...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 of TVM is that a single sum of money or a series of equal, evenly-spaced payments or receipts promised in the future can be converted to an equivalent value today. Conversely, one can determine the value to which a single sum or a series of future payments will grow to at some future date.
The timevalue of money serves as the foundation for all other notions in finance. It impacts business finance, consumer finance and government finance. Timevalue of money results from the concept of interest.
Key Components of TimeValue of Money
Present Value is an amount today that is equivalent to a future payment, or series of payments, that has been discounted by an appropriate interest rate. The future amount can be a single sum that will be received at the end of the last period, as a...

...and Future Price of Money
Trident University International
FIN 501
Module 2: Case Assignment
Dr. John Halstead
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 received in the future is not equivalent to money paid out or received today because inflation erodes money’s buying power. Basically, the power of time is on a person’s side and the premise that cash in hand today is more valuable than the same amount in the future due to its capability of earning interest. There are three factors affecting how much an investment will grow: time, money, and interest rate. TimeValue of Money is a concept that is very important in financial management. It affects business, personal, and government finance (Harvey, 2012) Within this paper we will discuss the definition of TimeValue of Money and identifies the importance of financial managers understanding the concept.
Time, Money and Interest Rates
Time has an important impact on the future value of money....

...A sole
proprietor has unlimited liability. Investors in corporations have limited liability. They can lose their investment, but no more.
Chapter 2
How to calculate Present values
Question 6: Perpetuities
An investment costs $1,548 and pays $138 in perpetuity. If the interest rate is 9%, what is the NPV?
Answer
NPV = −1,548 + 138/.09 = −14.67 (cost today plus the present value of the
perpetuity).
Question 7: Growing perpetuities
A common stock will pay a cash dividend of $4 next year. After that, the dividends are expected to increase indefinitely at 4% per year. If the discount rate is 14%, what is the PV of the stream of dividend payments?
Answer
PV = 4/(.14 − .04) = $40.
Question 19: Present values
As winner of a breakfast cereal competition, you can choose one of the following prizes:
a. $100,000 now
b. $180,000 at the end of five years
c. $11,400 a year forever
d. $19,000 for each of 10 years
e. $6,500 next year and increasing thereafter by 5% a year forever.
If the interest rate is 12%, which is the most valuable prize?
Answer
a. PV = $100,000.
b. PV = $180,000/1.125 = $102,136.83.
c. PV = $11,400/0.12 = $95,000.
d.
e. PV = $6,500/(0.12 0.05) = $92,857.14.
Prize (d) is the most valuable because it has the highest present value.
Question 20: Annuities
Siefried Basset is 65 years of age and has a life expectancy of 12 more years. He wishes...

...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 manager must understand the relationship between a dollar today [present value] and a dollar in the future [future value]. The timevalue of money is basically a measurement or perspective of an investment you might make while still considering its future decrease in value due to inflation. The timevalue of money allows us to understand what that inflation or decrease may become in the future or present. Most importantly, the timevalue of money concept allows us to decide whether it would be beneficial placing a sum of money into investment where it collects value from interest, or whether that same amount of money would be most valuable in the present due to inflation rates.
Understanding the concept of timevalue of money
It...

... 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 relate to factors that can impede the growth in value of money over time are explained, including risk, inflation and accessibility of assets. Basic formulas and tables have been provided to assist in calculating various formulations of timevalue of money problems. Explanations of common financial dealings in which the timevalue of money is an important consideration, such as annuities, loan amortization and tax deferral options, are included to help illustrate the concept of the timevalue of money in everyday life.
The timevalue of money is a fundamental financial principle. Its basic premise is that money gains value over time. As a result, a dollar saved today will be worth more in the future, and a dollar paid today costs more than a dollar paid later in...

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