Learn the toughest concepts covered in your Financial Accounting class with step-by-step video tutorials and practice problems.

Time Value of Money

1

Time Value of Money and Using Timelines

5m

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2

Time Value of Money Equation:Future Value

4m

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3

Problem

The formula *FV* = *PV* * (1 + r)^{n} is best used for:

A

Compounding

B

Discounting

C

Rebounding

D

Converting

4

Problem

You invest $4,545 in Clutch Bank today earning a juicy 10% annual interest. What is the value of your investment in one year? What is the value of the investment after two years?

5

Problem

The formula *PV* = *FV* (1 + r)^{n} is best used for:

A

Compounding

B

Discounting

C

Rebounding

D

Converting

6

Problem

You are saving up $12,000 for a luxurious European vacation two years from now. How much money would you need to invest today at Clutch Bank, earning their juicy 10% annual interest, to have enough for your vacation? How much would you need to invest today, if instead you could only earn 6% interest?

7

Time Value of Money

4m

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8

Annuity

5m

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9

Problem

Today, you purchased a $1,000 bond that matures in 5 years. The bond pays annual interest of 10%. Visualize these cash flows on a timeline.