01:220:110 Lecture 3: Week 3 9.16.13.docx
Document Summary
Time value of money: why is the time value of money important, the value of money is influenced by the time it is received, the value of a given amount of money is generally greater the earlier it is received, the earlier you start saving, the more quickly your money can earn interest and grow. Future value: suppose you want to know how much money you will have in five years if you invest now and earn an annual return of 4 percent, what if you invested your for 20 years instead of 5 years assuming the interest rate is still 4%, as the number of years increases, the fv increases, what if you invested your at an interest rate of 9% instead of 4% assuming a period of 20 years, the higher the interest rate, the more your money will grow, time and rate of return are crucial factors here.
