Time value of money coursework

Document Type:Coursework

Subject Area:Finance

Document 1

This interest can be perceived as compensation for the period within which the money was kept. The value of money at hand today is more than the value of the same money at a future date. This is simply because it can be invested and earn more in the future, as well there are other factors involved, such as Inflation and risks. The components in time value of money relationships are; • A value today called present value (P. V. Future value of a lump sum Considering that you want to invest in a stock that pays an annual interest of 5%, with a maturity period of 5 years. Assuming that the payment comprising of the interests accrued will be made at maturity, how much money you will receive after investing $ 2000? FV = PV * (1 + i)n = $2000 * (1 + 5%)5 = $ 2,552.

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