BUS550-WESTCLIFF UNIVERSITY-Financial Management Course-Discussion Question 3
Question
| CODE | UNIVERSITY | WORDS COUNT | REFERENCE |
| BUS550 | WESTCLIFF UNIVERSITY | 500 | APA |
Discussion Question 3:-
Please answer each of the following questions in detail and provide in-text citations in support of your argument. Include examples whenever applicable. Make sure to provide examples for each of the questions below.
a. Define and discuss the time value of money in the context of compounding interest.
b. Explain what an annuity is and what are the two most common types of annuity. Explain how the present value and future value of an annuity is determined.
c. Extend the notion of compounding mentioned in your answer to part “a” above to general situations where compounding is induced by growth, inflation, or deflation.
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The time value of money is a financial concept which states that the money that we received today or that is available today is more valuable than the money that we would receive on a future date. Compounding interest means that the interest is earned on interest over time The dollar gains tend to value over time because of the compound interest. The dollar that we have available today can be invested and earned interest further. An annuity is the amount of cash that is said to be generated in a given period of time. In this, a lump sum amount is paid to the issuer and then the issuer holds this amount for a period of time. The issuer in return makes fixed payments to the individual who bought it.