Time value analysis has many applications. For example, you use time value of money concepts in valuing stocks and bonds, establishing loan payment schedules, and deciding whether or not to invest in a new plant and/or equipment. As one of the more important topics in finance, time value of money underlies many other concepts covered in this course, so it is very important to not only understand the concept, but also to be able to compute time value of money problems that involve compounding and discounting skills. As you read through the examples in your readings, you might feel this is a very difficult topic. You may have difficulty relating to time value analysis because the context of the problems is presented in a textbook. Learning tends to be richer and long lasting when you can define your own problems and background contexts.
For this Assignment:
Think of four examples in your organization or from your personal life, or a combination of both, that demonstrate the following:
- Present Value (PV) of a lump sum
- Future Value (FV) of a lump sum
- Present Value (PV) of an annuity
- Future Value (FV) of an annuity
Explain your examples, including why they are relevant to your organization and/or personal life. Provide a rationale for interest or discount rates used in your examples.
Your paper should be at least 2 pages, not including Excel output. Use appendices for showing your Excel output. Be sure to have a conclusions section that documents what you learned from this exercise. Finally, be sure to use citations and related reference materials as appropriate.