# FP 120 Week 1 Time Value of Money Worksheet

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FP 120 Week 1 Time Value of Money Worksheet

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## FP 120 Week 1 Time Value of Money Worksheet

**Instructions**

**Complete** the Time Value of Money Worksheet.

**Post** your Time Value of Money Worksheet as a Microsoft^{®} Word^{®} attachment.

**Use**** **the *Bankrate Compound Interest Calculator* and input personal figures, changing the interest rate and the compounding of the interest rate.

**Submit**** **your responses in a Microsoft^{®} Word^{®} document.

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**Time Value of Money**

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**Refer: **to Chapter 1 “Time Value of Money” section of *Personal Finance.*

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**In **50 to 100 words please respond to the following questions.

- What is the definition of Time Value of Money? Please define present and future value?

- How does compounding interest differ from present and future value?

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**For **questions 3 – 5, use the *Bankrate Compound Interest Calculator*http://www.bankrate.com/calculators/savings/compound-savings-calculator-tool.aspxand input provided figures, changing the interest rate and the compounding of the interest rate (annually, semiannually, and quarterly) as delineated below:

- You place $1,500 in a savings account earning 3% interest compounded annually. How much will you have at the end of four years? How much would you have at the end of four years if interest is compounded quarterly?

- Change the interest rate to a higher rate. How much will you have at the end of four years if interest is compounded annually at a rate of 5%? How much would you have at the end of four years if interest is compounded quarterly?

- Now change the interest rate to a lower rate. How much will you have at the end of four years if interest is compounded annually at a rate of 2.5%? How much would you have at the end of four years if interest is compounded quarterly?

**Submit **your responses in a Microsoft Word document.

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