Tim explained a function in words and Paul wrote an equation.
Tim
The amount of money in a savings account increases at a rate of $225 per month. After eight months, the bank account has $4,580 in it.
Paul
y – 1,400 = 56 (x + 26)
Whose function has the smaller y-intercept?
a) Tim’s with a y-intercept of $2,700
b) Paul’s with a y-intercept of $2,856
c) Paul’s with a y-intercept of $2,800
d) Tim’s with a y-intercept of $2,780
Answers
option 1 is correct...
.
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. jai Mahakal
Answer:
Tim explained a function in words and Paul wrote an equation. Tim The amount of money in a savings account increases at a rate of $ 225 per month. After eight months, the bank account has $ 4,580 in it. Paul y-1,400=56x+26
Step-by-step explanation:
The time value of money (TVM) is the concept that a sum of money is worth more now than the same sum will be at a future date due to its earnings potential in the interim. The time value of money is a core principle of finance. A sum of money in the hand has greater value than the same sum to be paid in the future. The time value of money is also referred to as the present discounted value.
KEY TAKEAWAYS
The time value of money means that a sum of money is worth more now than the same sum of money in the future.
The principle of the time value of money means that it can grow only through investing so a delayed investment is a lost opportunity.
The formula for computing the time value of money considers the amount of money, its future value, the amount it can earn, and the time frame.
For savings accounts, the number of compounding periods is an important determinant as well.
Inflation has a negative impact on the time value of money because your purchasing power decreases as prices rise.
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Understanding The Time Value Of Money
Understanding the Time Value of Money (TVM)
Investors prefer to receive money today rather than the same amount of money in the future because a sum of money, once invested, grows over time. For example, money deposited into a savings account earns interest. Over time, the interest is added to the principal, earning more interest. That's the power of compounding interest.
If it is not invested, the value of the money erodes over time. If you hide $1,000 in a mattress for three years, you will lose the additional money it could have earned over that time if invested. It will have even less buying power when you retrieve it because inflation reduces its value.
As another example, say you have the option of receiving $10,000 now or $10,000 two years from now. Despite the equal face value, $10,000 today has more value and utility than it will two years from now due to the opportunity costs associated with the delay. In other words, a delayed payment is a missed opportunity.
The time value of money has a negative relationship with inflation. Remember that inflation is an increase in the prices of goods and services. As such, the value of a single dollar goes down when prices rise, which means you can't purchase as much as you were able to in the past.
Time Value of Money Formula
The most fundamental formula for the time value of money takes into account the following: the future value of money, the present value of money, the interest rate, the number of compounding periods per year, and the number of years.
Based on these variables, the formula for TVM is:
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=
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(
1
+
�
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)
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×
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where:
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=
Future value of money
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=
Present value of money
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Interest rate
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=
Number of compounding periods per year
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=
Number of years
FV=PV(1+
n
i
)
n×t
where:
FV=Future value of money
PV=Present value of money
i=Interest rate
n=Number of compounding periods per year
t=Number of years
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