Time Value of Money Week

Primary Response: Within the Discussion Board area, write 300–500 words that respond to the following questions with your thoughts, ideas, and comments. This will be the foundation for future discussions by your classmates. Be substantive and clear, and use examples to reinforce your ideas.

For this Discussion Board, please complete the following:

The time value of money is one of the three major principles of the study and practice of financial management. It is used to do the following:

• Evaluate potential investments
• Determine a rate of return on a project
• Calculate the required payments on a loan or annuity
• Estimate a future value of funds currently invested and the present value of funds to be received at some future date

Click on this link to review the time value of money.

Using what you learned while watching the above video, let’s say you just won $2 million. You can either choose to take your prize today or wait 1 year and accept $2,002,000 or even wait 2 years and receive $2,003,000. Knowing this information, discuss the following:

• Would you choose to accept the prize right away or wait 1–2 years?
• If accepting the prize right away, what do you plan on doing with the prize in regards to the concept of time value of money?
• Based on when you accept your prize, how can the time value of money models or formulas be used to determine the rate of return for an investment or the time it will take for a current sum to grow to a desired future amount? (Click this resource for help with time value of money models or formulas).