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Finance Fin 1103 Week 1 Individual Work Perform Time Value Money Calculations

In: Business and Management

Submitted By debbiedeb57
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Introduction to Finance - 1 Instructor: Kevin Higgins
Class Discussion Week 1 1-12-2015

Now that the basics of the financial planning process are clear, you are ready to learn the basic principles of the time value of money. Creating a financial plan is essential for proper financial planning. The following exercises will assist you in understanding the concept of time value of money.

Download and complete this worksheet for problem 2 below which is taken from the Do the Math exercises on pages 30-31 of your textbook.
Do the Math Problem #2: Present and Future Values. Rachael Berry, a freshman horticulture major at the University of Minnesota, has some financial questions for the next three years of school and beyond.
(a) If Rachael’s tuition, fees, and expenditures for books this year total $12,000, what will they be during her senior year (three years from now), assuming costs rise 4 percent annually? Use Appendix A-1 on page A-4 of your textbook.
(b) Rachael is applying for a scholarship currently valued at $5000. If she is awarded it at the end of the next year, how much is the scholarship worth in today's dollars, assuming inflation of 3 percent? Use Appendix A-2 on page A-6 of your textbook.
(c) Rachael is already looking ahead to graduation and a job, and she wants to buy a new car not long after her graduation. If after graduation she begins an investment program of $2,400 per year in an investment yielding 6 percent, what will be the value of the fund after three years? Use Appendix A-3 on page A-8 of your textbook.
(d) Rachael’s Aunt Karroll told her that she would give Rachael $1,000 at the end of each year for the next three years to help with her college expenses. Assuming an annual interest rate of 2 percent, what is the present value of that stream of payments? Use Appendix A-4 on page A-10 of your textbook.
Throughout the

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