28 Sep time value of money
Order Instructions
The time value of money is one of the three major principles of the study and practice of financial management. It is used to do the following:
Evaluate potential investments
Determine a rate of return on a project
Calculate the required payments on a loan or annuity
Estimate a future value of funds currently invested and the present value of funds to be received at some future date
Review the time value of money on this link: https://www.youtube.com/watch?app=desktop&v=1CO5hf2ns18
Using what you learned while watching the above video, let’s say you just won $2 million. You can either choose to take your prize today or wait 1 year and accept $2,002,000 or even wait 2 years and receive $2,003,000. Knowing this information, discuss the following:
Would you choose to accept the prize right away or wait 1–2 years?
If accepting the prize right away, what do you plan on doing with the prize in regards to the concept of time value of money?
Based on when you accept your prize, how can the time value of money models or formulas be used to determine the rate of return for an investment or the time it will take for a current sum to grow to a desired future amount?
