Question

In: Finance

Explain why $100 received today is not the same as $100 received next year. What is...

  • Explain why $100 received today is not the same as $100 received next year. What is the meaning of the time value of money.
  • What is the purpose of learning the mathematics behind the time value of money?
  • What are the factors that affect the overall level of interest rates?

Solutions

Expert Solution


Related Solutions

Work through and explain the following: An investor spent -$100 today and received; • +$10 Y1...
Work through and explain the following: An investor spent -$100 today and received; • +$10 Y1 •+$75 Y2 •+$150 Y3 Assume an interest rate of 8%, Advise if you would accept this project and why.
A dollar received today has the same economic value as a dollar received tomorrow.    True         ...
A dollar received today has the same economic value as a dollar received tomorrow.    True          False Market interest rate reflects both earning and purchasing power of the money in the market.     True          False The practice of charging an interest rate to an initial sum of money and to any previously accumulated interest that has not been withdrawn from the initial sum is   …………… compound interest                 b) simple interest             c) deflation             d) nominal interest An initial amount of...
What is $100 today, plus $100 at the end of 1 year, plus $200 at the...
What is $100 today, plus $100 at the end of 1 year, plus $200 at the end of 2 years, plus $300 at the end of 3 years, worth to you today, given a discount rate of 4% What is $100 today, plus $100 at the end of 1 year, plus $200 at the end of 2 years, plus $300 at the end of 3 years, worth to you at the end of year 3, given a discount rate of...
What is the PV of $100 received in year 10 (at a discount rate of 1%)?...
What is the PV of $100 received in year 10 (at a discount rate of 1%)? (Do not round intermediate calculations. Round your answer to 2 decimal places.)      Present value $       b. What is the PV of $100 received in year 10 (at a discount rate of 13%)? (Do not round intermediate calculations. Round your answer to 2 decimal places.)      Present value $       c. What is the PV of $100 received in year 15 (at a...
what is the approximate future value of $100 to be received in one year, $200 in...
what is the approximate future value of $100 to be received in one year, $200 in two years, and $300 in three years, a 5% annual interest?
Why would you prefer to receive $100 today rather than wait and receive $100 one year...
Why would you prefer to receive $100 today rather than wait and receive $100 one year from now? Prompts: For the first part of the discussion post, list all the potential explanations you can think of for the time value of money. For each cause, write a sentence or two about how it explains your preference for money today rather than money at some future date. Let’s see how many different explanations we can uncover. For the second part of...
You are considering a project that costs $500 to invest in today, and will pay you $100 next year, $50 in two years, and $100 in three years.
You are considering a project that costs $500 to invest in today, and will pay you $100 next year, $50 in two years, and $100 in three years. The cash inflow will grow at a constant rate of 3% per year after year 3, and you will receive cash inflows for 25 years (total including the first three CFs). Your discount rate is 14%. What is the NPV of the project? Also, what would the NPV be if the cash...
You are considering a project that costs $500 to invest in today, and will pay you $100 next year, $50 in two years, and $100 in three years.
  You are considering a project that costs $500 to invest in today, and will pay you $100 next year, $50 in two years, and $100 in three years. The cash inflow will grow at a constant rate of 3% per year after year 3, and you will receive cash inflows for 25 years (total including the first three CFs). Your discount rate is 14%. What is the NPV of the project? Also, what would the NPV be if the...
Besides Inflation, Why are dollars received in the future worth less than dollars received today?
Besides Inflation, Why are dollars received in the future worth less than dollars received today?
Explain what is meant by diversification? Is this the same as asset allocation? Why or why...
Explain what is meant by diversification? Is this the same as asset allocation? Why or why not? Why are these terms important to you as an investor? What can happen if you do not properly diversify/allocate? What life considerations must be taken into account when developing a diversification / allocation strategy? How do any of the financial instruments you have learned about so far in this course help accomplish these needs?
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT