4.4 Assignment: Time Value of Money Web Page

Getting Started

Upon successful completion of the course material, you will be able to:

• Compute and interpret various calculations for the time value of money.

Resources

• Textbook: Foundations of Financial Management
• Website: Connect

Background Information

There are different applications to the time value of money, including solving for the present value of a future sum or series of sums (called “discounting”), or solving for the future value of a single sum or series of sums (called “compounding”). In this assignment, you will answer questions related to various applications of the time value of money. 

Instructions

1. Review the rubric to make sure you understand the criteria for earning your grade.
2. Review Chapter 9 from Foundations of Financial Management.
3. Review the videos and other learning support resources for this week’s assignments in the Connect Multimedia Library to help further understanding.
4. Respond to the following questions:
   1. What is the time value of money, and why is it important?
   2. The processes of discounting and compounding are related. Explain this relationship.
   3. How would an increase in the interest rate (r) affect the future value (FV) of a sum of money? How would a decrease in the holding period (n) affect the future value (FV) of a sum of money? Explain why.
   4. What is an annuity? Distinguish between an annuity and a perpetuity.
5. When you have completed your assignment, save a copy for yourself and submit a copy to your instructor by the end of the workshop.