Time Value of Money Q1. Mr. Sundaram is planning to retire this year. His company can pay him a lump sum retirement payments of Rs 2‚ 00‚000 or Rs 25‚000 life time annuity whichever he chooses. Mr. Sundaram is in good health and estimates to live for at least 20 more years. If his interest rate is 12%‚ which alternative should he choose? Ans Present Value of Annuity 25000*7.469*1.12 = 2‚09‚132 Which is greater than lump sum value of Rs. 2‚00‚000. So Annuity option is better
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points for the entire assignment add up to 100. Question 1 (5 points) $50 today is worth MORE than $50 tomorrow. Your Answer | | Score | Explanation | True | | 5.00 | Correct. You understand Time value of money. | Total | | 5.00 / 5.00 | | Question Explanation We have assumed time value of money is positive. Question 2 (5 points) $100 invested for 10 years at 12% interest is worth more in FV terms than $200 invested for 10 years at 4% interest. Your Answer | | Score | Explanation |
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TERMPAPER ON APPLICATION OF BUSINESS MATH IN BUSINESS [pic] U N I V E R S I T Y O F D H A K A Submitted to: Md. Ariful Islam Lecturer Dept. of Banking and Insurance Dhaka University Submitted by: Md. Mahfuzur Rahaman Biswas ID No. 51221068 Batch-21st Department of Banking Faculty of Business Studies Letter of Transmittal 12th December 2012 To Md. Ariful Islam Lecturer Department of Banking & Insurance
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SECTION 2: TIME VALUE OF MONEY Decision problems in business usually involve a decision over whether to accept one alternative over another‚ or whether to implement a plan or not. In most cases‚ the effects of these decisions are felt in the future. Examples: Expand into a new market (geographical‚ consumer segment‚ etc.) or not? Now or later? Outsource production or keep it in-house? Grow organically or acquire a competitor? Or don’t grow at all? Purchase shares in Microsoft
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future value? B. 7 percent interest‚ compounded monthly 5. Hilltop‚ Inc. earns $.12 in profit on every $1 of sales. The firm pays out 55 percent of its profits to its shareholders. The firm has $.75 in assets for every $1 of sales. What is the internal growth rate? B. 7.76 percent 6. Your firm has been told that it needs $100‚000 today to fund a $150‚000 expansion project 8 years from now. What rate of interest was used in the present value computation? B. 5.20 percent 7. The current value of future
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CHAPTER 5 The Time Value of Money CHAPTER ORIENTATION In this chapter the concept of a time value of money is introduced‚ that is‚ a dollar today is worth more than a dollar received a year from now. Thus if we are to logically compare projects and financial strategies‚ we must either move all dollar flows back to the present or out to some common future date. CHAPTER OUTLINE I. Compound interest results when the interest paid on the investment during the first period
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decisions about what assets or products to invest in‚ how to manage cash and how to raise funds for growth. Topics include the role of corporate finance‚ cash flow and financial statement‚ time value of money‚ discounted cash flow valuation‚ interest rate and bond valuation‚ stock valuation‚ net present value‚ and making capital investment decisions. Text Book Stephen A. Ross‚ Randolph W. Westerfield‚ and Bradford D. Jordan‚ Fundamentals of Corporate Finance‚ Seventh edition‚ Irwin McGraw-Hill
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takeover * Shareholder Value * The price at which the stock would sell if all investors had all knowable information about a stock. * The primary financial goal of management is shareholder wealth maximization‚ which translates to maximizing stock price. * Value of any asset is present value of cash flow stream to owners. * Most significant decisions are evaluated in terms of their financial consequences. * Stock prices change over time as conditions change
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FIN 502 – Personal Financial Planning Chapter 1 – Module 2 Time value of money * How to compare monetary amounts you pay or receive at different times * The arithmetic with which we convert money between periods‚ or calculate what rate of return is implied by a given set of cash flows Single Period – Rate of Return * N = amount of years * I% = x (what we’re trying to find) * PV = How much it’s worth today * FV = How much it’s worth at maturity date
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under the copyright laws. Hewlett-Packard Company Palo Alto‚ CA 94304 USA ii HP 10bII+ Financial Calculator iii Keyboard Map Legend Number (row of keys) 1 2 Primary Functions (white) 12 character‚ sevensegment screen display Time Value of Money (TVM) Payments per year‚ interest conversion‚ amortization‚ Bond calculations SHIFT Down (orange functions on key bevel) \ SHIFT Up (blue functions above keys) ] 3 Input key‚ markup‚ cost‚ Date and change of price and margin days
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