Description
Everyday we choose one financial decision over another. Should we buy a cup of coffee or should we save that money? What is the personal and financial cost to us? In this assignment you determine the time value of money and examine opportunity cost, among other fundamentals of economics and finance.
Review your Week 2 Learning Activities.
Complete the Time Value of Money, Opportunity Cost, and Income Taxes Worksheet.
Explanation & Answer
Attached.
Time Value of Money, Opportunity Cost, and
Income Taxes Worksheet
FP/100 Version 1
University of Phoenix Material
Time Value of Money, Opportunity Cost, and Income Taxes Worksheet
Scenario 1: Time Value of Money / Cash Management Products
1.
Use this Bankrate’s Simple Savings calculator to complete Scenario 1:
http://www.bankrate.com/calculators/savings/simple-savings-calculator.aspx. You will enter
the Initial Amount of Savings (Present Value), Annual Interest Rate (Rate of Return), and
Number of Periods/Years into the calculator. The calculator will compute the Future Values.
In this scenario you will look at the impact of interest rates on your savings. Suppose that you
have $2,000 of savings. You don’t anticipate needing to dip into these funds in the next five
years. Based on the information provided in the table, calculate the future value (FV) of
$2,000 at the end of years 1 and 5 if it were to be completely invested in each of the different
cash management products.
Enter your answers in the indicated cells of the table below. The Restrictions/Fees on Product
Usage column relates to question 2 of Scenario 1.
Product
Annual
Restrictions/Fees
FV at end of Year 1
FV at end of Year 5
Answer:
Answer:
Interest on Product Usage
Rate
Checking
0.00%
• No minimum
Copyright © 2017 by University of Phoenix. All rights reserved.
1
Time Value of Money, Opportunity Cost, and
Income Taxes Worksheet
FP/100 Version 1
• No limit on
Account
withdrawals
Savings
1.50%
Account
Certificate 5%
of Deposit
(CD)
FV= Co * (1+r)n
FV= Co * (1+r)n
2000 * (1+0)1
2000 * (1+0)5
= 2000
=
2
2000
Calculator Inputs:
Calculator Inputs:
Initial Amount:2000
Initial Amount: 2000
Annual Interest Rate
Annual Interest Rate
0(compounded
(compounded quarterly):
quarterly):
0
Number of Years:1
Number of Years: 5
• No minimum
Answer:
Answer:
• Limited to 3
FV= Co * (1+r)n
FV= Co * (1+r)n
withdrawals per
=2,030.17
= 2,155.47
month
Calculator Inputs:
Calculator Inputs:
Initial Amount: 2000
Initial Amount: 2000
Annual Interest Rate
Annual Interest Rate
(compounded
(compounded quarterly):
quarterly): 1.5%
1.5%
Number of Years: 1
Number of Years: 5
Answer:
Answer:
FV= Co * (1+r)n
FV= Co * (1+r)n
= 2,101.89
= 2,564.07
• $500 minimum
balance
...