Discussion Questions

How is the future value (Appendix A) related to the present value of a single sum (Appendix B)?

How is the present value of a single sum (Appendix B) related to the present value of an annuity (Appendix D)?

Why does money have a time value?

Does inflation have anything to do with making a dollar today worth more than a dollar tomorrow?

Adjust the annual formula for a future value of a single amount at 12 percent for 10 years to a semiannual compounding formula. What are the interest factors (FV_IF) before and after? Why are they different?

If, as an investor, you had a choice of daily, monthly, or quarterly compounding, which would you choose? Why?

What is a deferred annuity?

List five different financial applications of the time value of money.?