Money has different values based on time. Money in your pocket has a current value, but money owed to you has a varying value based on how sure it is that you will receive it and when. It is possible to estimate its value. In this assignment, you will analyze the value of money on the basis of this Weekâ€™s learning.
Review Understanding The Time Value of Money to attain more information on how the value of money is based on time.
Find the following values for a lump sum assuming annual compounding:
- The future value of $500 invested at 8 percent for 1 year
- The future value of $500 invested at 8 percent for 5 years
- The present value of $500 to be received in 1 year when the opportunity cost rate is 8 percent
- The present value of $500 to be received in 5 years when the opportunity cost rate is 8 percent
- Analyze present and future values and their implications for the balance sheet and the budget of an organization.