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Ch. 14 - The Financial SystemWorksheetSee all chapters

# Time Value of Money Calculations

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Sections
Financial System Definitions
Savings Equal Investment
Market for Loanable Funds
Shifts in the Market for Loanable Funds
Stocks, Bonds, and Mutual Funds
Risk and Insurance
Risk and Diversification
Time Value of Money Calculations
Calculating Bond and Stock Prices

Concept #1: Future Value Calculations

Practice: You invest $4,545 in Clutch Bank today earning a juicy 10% annual interest. What is the value of your investment in one year? What is the value of the investment after two years? Practice: Using a little bit of algebra, we can rearrange the time value of money formula: FV = PV x (1 + r)n The formula FV = PV x (1 + r)n is best used for: Practice: You are saving up$12,000 for a luxurious European vacation two years from now. How much money would you need to invest today at Clutch Bank, earning their juicy 10% annual interest, to have enough for your vacation?

Practice: You are saving up \$12,000 for a luxurious European vacation two years from now. How much money would you need to invest today at Clutch Bank, earning their juicy 10% annual interest, to have enough for your vacation? How much would you need to invest today, if instead you could only earn 6% interest?