Question

Identify and discuss at least two ways you might be able to use the time value of money calculations in your personal life.

Answer 1

Two ways we might be able to use the time value of money in our personal life

a)Suppose we have invested a certain amount of money let say ($x) at an interest rate (y% p.a.) for a certain period (z years). Given this case we can know the future value that we can expect after z years.

b)On a similar note suppose we want to know how much we should invest now to earn a certain amount of money let say ($x) at a given interest rate (y% p.a.) after a period (z years). Given this case we can know the present value that we should invest now so that we can expect the amount $x after z years.