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Compound interest, Present value and Time Value of Money

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1. Explain what is the difference between "simple" and "compound" interest? Provide some of the uses of compound interest in business. What are the effects of using compound interest when evaluating future value transactions and calculations.

2. What is "present value"? What is an example of the "present value" concept? How does a single cash flow present value example differ from an annuity calculation?

3. How is a home mortgage an example of TVM? How can you show that more interest is paid at the beginning of a loan period than at the end?

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Solution Summary

Answers to questions on simple and compound interest, present value and Time Value of Money (TVM).

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