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# The Time Value of Money

### Actions to Increase Money Supply

Let's say that the Fed decides to focus on the creating jobs in the economy. It will do this by increasing the money supply. What actions can the Fed take to increase the money supply?

### TVM concepts: Sheila & Ed investing, buy a note receivable, plan retirement, lottery

Sheila and Ed have approached you with their problems as highlighted situations 1-5. Situation #1 Sheila and Ed have \$150,000 cash to invest with a bank offering a 4% interest rate. They are not sure whether to invest the cash with interest rate compounded quarterly, semi-annually, or annually. Calculate the balance at th

### Explain why the concept of present value is so important for corporate finance and is often the very first topic taught in any finance class

Can you help with this?? 1. In two to three paragraphs, explain why the concept of present value is so important for corporate finance and is often the very first topic taught in any finance class. 2. Calculate the future value of the following: a. \$500 if invested for five years at a 4% interest rate b. \$150 if in

### Time Value of Money Additional Down Payment

Please see the attached file. 1. I am getting ready to buy a new car. I plan on spending \$35,000 for the car and I believe my current car has a \$17,000 trade-in value and I make no additional downpayment. I keep my vehicles 5 years but would like a three-year loan. What will my monthly car payment be at the end of each

### Time Value of Money

1. Funding your retirement You plan to retire in exactly 20 years. Your goal is to create a fund that will allow you to receive \$20,000 at the end of each year for the 30 years between retirement and death (a psychic told you would die exactly 30 years after you retire). You know that you will be able to earn 11% per year dur

### Value of future payments

Jean Splicing will receive \$8,500 a year for the next 15 years from her trust. If a 7 percent interest rate is applied, what is the current value of the future payments

### Present Value

Apply the concept of present value to Safeway, Inc. Suppose Safeway,Inc is selling a bond that will pay you \$1000 in one year from today. Keep in mind that if your company has financial difficulties in one year you might not get your full \$1000 back. Given that a dollar one year from now is always worth less than a dollar tod

### Time Value of Money

Apply the concept of present value to Second Life. Suppose Second Life is selling a bond that will pay you \$1000 in one year from today. Keep in mind that if Seconbd Life has financial difficulties in one year you might not get your full \$1000 back. Given that a dollar one year from now is always worth less than a dollar toda

### 15 BUS MATH Questions: Time Value of Money concepts

1. The terms of a loan indicate how often interest is compounded. () True False 2. To compound daily means to compound 360 times a year. () True False 3. The number of compounding periods for \$6,600.00 at 12% compounded quarterly for 15 years is 30 periods. () True Fals

### Barry's personal finance class: How fast does money grow

See the attached file.

### Time Value of Money: annuities, present value, cash flows, compound interest

Explain the concept of the time value of money. You will need to include and define/explain the concepts of "future value", annuities, present value, cash flows, compound interest and opportunity cost in your answer

### Evaluating Phone Plans Using the Time Value of Money

A recent article at MSN was "Droid Versus Pre Versus iPhone: A Cost of Ownership Reality Check: Which of these three hot handsets will cost you the most over two years?" By Ian Paul, PC World. (It can be found at the following although it is not needed for this question as the data is listed below.) http://tech.msn.com/pr

### Bank One loans ABC Corporation \$50,000 to buy a piece of equipment.

52. Bank One loans ABC Corporation \$50,000 to buy a piece of equipment. Bank One accepts a note due in 2 years with interest at 12% compounded monthly. How much cash does Bank One expect to receive when the note is paid at maturity? 53. Neal Carter wants to establish a retirement fund for him and his wife. They want to

### Cash flow; TVM, PV of Hartson liability, FV of Kim's annuities

Jamison Inc. shows the following information on its 2009 income statement: sales= \$196,000, costs=\$104,000, other expenses= \$6,800, depreciation expense = \$9,100, interest expense = \$14,800, taxes= \$21,455, dividends = \$10,400. In addition, you are told that the firm issued \$5,700 in new equity during 2009 and redeemed \$7,300 i

### Calculate future and present value; conclusions about the discounting interval.

? Calculate the future value of the following: ? o \$5,000 compounded annually at 6% for 5 years o \$5,000 compounded semiannually at 6% for 5 years o \$5,000 compounded quarterly at 6% for 5 years o \$5,000 compounded annually at 6% for 6 years ? ? Answer the following: What conclusions can be drawn about the frequen

### Time money

1.Find the compound amount if \$6,400 is invested for 2 years at 12% compounded monthly. What difference would compounding daily make in this example? 2.Deposits of \$1,000, \$1,100 and \$680 were made into a savings account, the first two years ago, the second 18 months ago, the third 6 months ago. How much is in the account no

### Analyzing the Time Value of Money

Sally and Ed have approached you with their financial problems, described below. Situation #1 Sally and Ed have \$10,000 cash to invest with a bank offering a 4% interest rate. They are not sure whether to invest the cash with the interest compounded quarterly, semi-annually, or annually. Calculate the balance at the end o

### Calculate greatest after-tax cash of two options for 8 year time period for Susan Lee

Susan Lee who is 26 years-old has a new job with Inspiron. She is planning to start her own business in 8 years so she has two options to start saving money to open her shop: 1) She can participate in 401K plan that the company offers as part of the employee benefit package. She can afford to contribute \$5,000 each year to he

### Do you think that TVM is like driving a car?

Your answer "I think that driving a car and the time value of money are a good analogy. First, the longer you drive your car, the more gasoline you use. Hence, at the end of the journey, that is when you reach your destination, the value of the gasoline in the automobile is much less than when you started the journey. Second, th

### Retirement savings, maximum annual withdrawal

You plan to have \$750,000 in savings and investments when you retire at age 60. Assuming that you earn an average of 9 percent on this portfolio, what is the maximum annual withdrawal you can make over a 25 year period of retirement?

### Future Value and Stock Valuation

A-Future Value: What is the future value in three years of \$1000 invested in an account with a stated annual interest rate of 8 percent, a. Compound annually? b. Compound Semiannual? c. Compound monthly? d. Compound Continuously? e. Why does the future value increase as the compounding period shortens? B-Stock Valuation:

### Bill Shaffer - Future or Present Value

Bill Shaffer wishes to have \$200,000 in a retirement fund 20 years from now. He can create the retirement fund by making a single lump sum deposit today. If upon retirement in 20 years Bill plans to invest the \$200,000 in a fund that earns 11 percent, what is the maximum annual withdrawal he can make over the following 15 years?

### Amount to be deposited today

Bill Shaffer wishes to have \$200,000 in a retirement fund 20 years from now. He can crate the retirement fund by making a single lump sum deposit today. If he can earn 10 percent on his investments, ow much must Bill deposit today to create the retirement fund? If he can earn only 8 percent on his investments? Compare and discus

### Future value or present value

You think that in 15 years it will cost \$75,000 to give your child a college education. Will you have enough if you take \$25,000 today and invest it for the next 15 years at 8 percent? If you start from scratch, how much will you have to save each year to have \$75,000 in 15 years if you can earn an 8 percent rate of return on yo

### Time Value of Money

1.16 At an interest rate of 8% per year, \$10,000 today is equivalent to how much (a) 1 year from now and (b) 1 year ago? 1.20 Certain certificates of deposits accumulate interest at 10% per year simple interest. if a company invests \$240,000 now in these certificates for the purchase of a new machine 3 years from now, how

### Sample Business Analysis questions: present value, risk-free rate, total return, dividends and more...

1. Find the present value of a payment stream of \$100 per year for the first fifteen years and \$200 per year for the next five years, given a 12% discount rate. 2.A company stock was priced at \$15 per share two years ago. The stock sold for \$13 last year and now it sells for \$18. What was the total return for owning this com

### Ms. Ima Rich Annuity: Calculate the rate of 20 annual installments

Ms. Ima Rich has just passed away. In her will she has left your not-for-profit organization \$2 million dollars to be paid out in annual installments of \$100,000 a year for the next twenty years. The executive director of your organization wants the money now to purchase a new headquarters. You have been charged with find

### Computation of Future Values, Present Values, and Bond Prices

E6-4 (Computation of Future Values and Present Values) Using the appropriate interest table, answer each of the following questions. (Each case is independent of the others.) [a] What is the future value of 20 periodic payments of \$4,000 each made at the beginning of each period and compounded at 8%? [b] What is the p

### Acme Company Global issues: TVM concepts, FV, PV, periodic deposit, discounted value

Global Finance DELIVERABLE: Excel spreadsheet Details: The Acme Company has its European subsidiary based in the Euro zone. The subsidiary must solve a series of five problems that require you to apply the concept of "time value of money," or TVM. The five problems are listed below. Solving them will require the use o

### Townscape Public Administration: Moratorium on future building projects?

Details: Townscape has been on a five year run of consistent growth. The economy has since begun a downturn and the city government must now decide whether to place a hold on future growth. As a member of the city council you have been asked to consider the pros and cons of new development and its impact on current services. Con