# week 6 What is the time value of money and how can compound interest be used to calculate the present value of any future amount of money

*label*Business Finance

*timer*Asked: Oct 5th, 2017

*account_balance_wallet*$10

**Question description**

Each question should be 200 words minimum

1. What is the time value of money and how can compound interest be used to calculate the present value of any future amount of money?

2. How is the word "risk" used in financial economics and what is the difference between diversifiable and non-diversifiable risk?

3. What is the validity of the most frequently presented arguments for protectionism?

4. What are the economic effects of tariffs and quotas?

5. First, clearly and fully differentiate among specialization, absolute advantage, and comparative advantage. Then, please clearly explain why these concepts are important in the U.S. and in ROW (rest of world) economies

6. What are the causes and consequences of recent U.S. trade deficits?

7. What is the balance sheet the United States uses to account for international payments made/paid and for international payments received?

## Tutor Answer

heres the final assignment

SURNAME 1

Student’s Name

Professor’s Name

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Date

1. What is the time value of money and how can compound interest be used to

calculate the present value of any future amount of money?

Time value of money also known as the present discounted value of money is based

on the premise that money held right now has a greater value in the future (Maria &

Kennedy 115). This is because the amount of money that one has at the moment has the

potential of earning interest and therefore in the future it will be worth much more than its

value in the current time (Dwivedi 87).

Compound interest can be used to calculate the value of an amount in the future. The

process of compounding is based on the concept of exponential growth of an investment

along with the initial principal. In this case, the initial amount changes at every end of the

stated compounding period. For instance if an investor has $10,000 and would like to

invest it in a project that earns him a compounded interest of 1% per month then each

month the principle will have increased by 1% so that by the end of the year the principle

itself will be a larger amount than the initial 10,000 invested.

In the case that the investor would like to know the value of his $10,000 after a year

he can simply use the compound interest formulae illustrated below and come to a

conclusion on whether he is interested in the investment.

Formulae = [P (1 + i)n] – P

= P [(1 + i)n – 1]

SURNAME 2

= 10,000 ( 1 + 0.05)12 – 1)

= 7958.56 +10000

= $17958.56 this will be the value of the investor’s money at the end of the year

2. How is the word "risk" used in financial economics and what is the difference

between diversifiable and non-diversifiable risk?

A risk is situation that could possibly lead to losses. When the possibilities of a loss

are more eminent that the situation is termed as high risk and when the probability of the

risk occurring are low the situation is low risk (Dwivedi 120). Diversifiable risks are also

referred to as unsystematic risks are when a significant part of the asset is exposed to

certain risks that can be reduced by diversification. The causes of the risks are random

and can occur at any given point in ti...

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