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Basic economic premise behind time value of money

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Reference no: EM131016013

Time Value of Money

(I need help explaining the following and/or demonstrating it for my upcoming exam if anyone could help me comprehend the concepts I would greatly appreciate it!!)

- Explain the basic economic premise behind time value of money (dollar today > dollar tomorrow)

- Calculate, interpret, and explain the following types of time value of money calculations:

- Solve for PV, IR, N, or FV in situations involving lump sums either compounding or discounting

- Solve for PV, IR, N, FV, or PMT in situations involving equal payments (annuities)

- Solve multi-staged time value of money situations

- Solve when the compounding period is more frequent than annual (i.e. monthly or quarterly)

- Describe the difference between an ordinary annuity and an annuity due and calculate each

- Solve for PV, IR, N, and FV in situations involving uneven cash flows

- Use the Equivalent Annual Rate (EAR) formula to find the EAR given a nominal rate

Reference no: EM131016013

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