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Week 2 Study Guide

The document outlines the learning outcomes for a course on the time value of money, emphasizing understanding its concept, cashflow timelines, and calculations of present and future values. It includes practice problems to reinforce these concepts, such as calculating future salaries, present deposits for future goals, and historical tuition costs. Students are encouraged to engage with both basic and comprehensive problems to prepare for quizzes and exams.

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kailatindall
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11 views1 page

Week 2 Study Guide

The document outlines the learning outcomes for a course on the time value of money, emphasizing understanding its concept, cashflow timelines, and calculations of present and future values. It includes practice problems to reinforce these concepts, such as calculating future salaries, present deposits for future goals, and historical tuition costs. Students are encouraged to engage with both basic and comprehensive problems to prepare for quizzes and exams.

Uploaded by

kailatindall
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Week 2: Time Value of Money 1

Learning Outcomes
Students who master the materials from this topic:

• Understand the concept of the time value of money and the components of it
• Be able to create a cashflow timeline
• Demonstrate compounding and discounting cash flows
• Calculate present value, future value, interest rate, period or annuity
• Apply the concept of the time value of money in the real world setting

Practice Problems
Practice problems are designed to help you understand the concepts and calculations. You are highly
recommended to complete at the basic problems for the quizzes and the midterm, while comprehensive
problems will help you prepare for some harder questions on the final exam.

Basic Problems
1. What are the three reasons that most people prefer to receive a dollar today instead of some
time in the future?

2. The average salary in Texas is $57,300 in 2024. Suppose that the average salary increases by 3
percent each year. How much the average salary should be 20 years from today?

3. 18 years from today, you want to have $15,000 in your account. If you can earn 5 percent a year
in the account, how much do you need to deposit today to meet the goal in 18 years?

4. Suppose that your in-state tuition at Texas A&M University is $13,099 this school year. Your
parents who are Texas A&M University alumnus said that their tuition for their final year of
college was $6,444. If the tuition grew at a 3 percent annual rate, how long ago did your parents
pay their last tuition at the A&M?

5. Suppose that your grandparents purchase a piece of land for $5,000, 50 years ago. Today, your
mom inherited the land that is worth $35,000. What is the annual rate of return on this land?

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