# Respond to questions regarding Time Value of Money and solve 4 problems

OVERVIEW:

Respond to four questions and solve three computational problems about time value of money (TMV) as it applies to annuity cash flows.

You know how the TVM concept as applies to single cash flow. However, in real life you will come across financial applications that require multiple or annuity cash flows. That is why it is important to know how to apply the TVM concept to annuity cash flows; for example, how to amortize a mortgage or car loan.

RESOURCES:

• Cornett, M., Adair, Y., & Nofsinger, J. (2014). M: Finance (2nd ed.). New York, NY: McGraw-Hill.

INSTRUCTIONS:

Respond to the questions and complete the problems.

Questions

In a Word document, respond to the following. Number your responses 1–4.

• Explain whether you would you rather have a savings account that paid interest compounded on a monthly basis or compounded on an annual basis? Why?
• Describe what an amortization schedule is and its uses. Explain the purpose of an amortization schedule.
• Interest on a home mortgage is tax deductible. Explain why interest paid in the early years of a home mortgage is more helpful in reducing taxes than interest paid in later years.
• Explain the difference between an ordinary annuity and an annuity due.

Use references to support your responses as needed. Be sure to cite all references using correct APA style. Your responses should be free of grammar and spelling errors, demonstrating strong written communication skills.

Problems

In either a Word document or Excel spreadsheet, complete the following problems.

• You may solve the problems algebraically, or you may use a financial calculator or an Excel spreadsheet.
• If you choose to solve the problems algebraically, be sure to show your computations.
• If you use a financial calculator, show your input values.
• If you use an Excel spreadsheet, show your input values and formulas.