Personal Finance 1st Edition by Jack R. Kapoor

Exercise 11

Determining the Time Value of Money. Using Exhibit 13–1, complete the following table. Then answer the questions that follow the table. Hint: To calculate the total amount of interest or earnings, subtract the amount of your total investment from the value at the end of the time period. (Obj. 1)

Annual Deposit	Rate of Return	Number of Years	Investment Value at the End of Time Period	Total Amount of Investment	Total Amount of Interest or Earnings
$2,000	5%	10
$2,000	9%	10
$2,000	5%	20
$2,000	9%	20

a. In the above situations, describe the effect that the rate of return has on the investment value at the end of the selected time period.

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b. In the above situations, describe the effect that the number of years has on the investment value at the end of the selected time period.

Step 1 of 4

Time value of money is a concept that states that the money received today has more worth than the money received at some future date. It shows that the money has more worth if it is receivable today.