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The concept of the time value of money is very important in today’s business world. No doubt you have studied this concept previously in basic accounting, finance, and business math classes. This course is intended as a review of the subject and includes illustrations of common applications.

Decision makers, whether business executives or parents saving for their children’s college education, must try to adjust for the impact of interest and changing economic prices. Consider the following illustrative situations:

  • You are in the market for a used car. A newspaper advertisement offers the vehicle you want with two payment options. You can choose between an immediate cash price of $22,500 or a 6% financing option with payments over five years of $395 at the end of each month. Which alternative purchase plan should you choose?
  • You intend to provide income for your retirement. If you are 20 years old, how much must you invest now in order to establish a fund large enough to pay for your retirement in 45 years?
  • Every month, millions of individuals make mortgage payments on their homes. Because part of each payment is interest, and therefore tax-deductible, a method is needed for calculating the interest portion of each payment. What are the procedures for determining the interest and principal portions of each payment over the life of the mortgage?

In each of the preceding situations, decisions must be made regarding inflows and outflows of money over an extended period of time. Making correct financial decisions requires that the time value of money be taken into account. This means that dollars to be received or paid in the future must be “discounted” or adjusted to their present value. Alternatively, current dollars may be “accumulated” or adjusted to their future value so that comparisons of dollar amounts at different time periods can be meaningful.

Because future and present value techniques are commonly used in business and have become increasingly important, this course explains these techniques and provides several illustrations of their use.

Learning Objectives

  • Explore how present value and future value tables can be usedto do time value of money (TVM) computations.
  • Explore how a computer spreadsheet can quickly perform time value of money computations.  
  • Recognize the importance of the time value of money. 

 

 

Last updated/reviewed: May 02, 2018

7 Reviews (30 ratings)Reviews

4
Member's Profile
Good review and excellent presenter. Some of the material is archaic. Could do away entirely with the modules related to using a business calculator - would cut out over 40 minutes of unneeded instruction.
3
Anonymous Author
It was a good course, but difficult to listen through tables and calculator sections when I will be using in excel.
4
Member's Profile
A good course and the instructor does a very good job of illustrating how to go about solving each example.
3
Member's Profile
You need tables to calculate values in the final exam, The concepts are nicely explined
5
Anonymous Author
Excellent presentation and great refresher
4
Member's Profile
Great practice.
4
Anonymous Author
nice refresher

Prerequisites

Course Complexity: Foundational

No Advanced Preparation or Prerequisites are needed for this course. 

Education Provider Information

Company:
Illumeo, Inc., 75 East Santa Clara St., Suite 1215, San Jose, CA 95113
Contact:
For more information regarding this course, including complaint and cancellation policies, please contact our offices at (408) 400- 3993 or send an e-mail to .
Course Syllabus
INTRODUCTION AND OVERVIEW
Examples in Calculation
  24:14TVM Calculations Examples 1 - 4
  17:46 TVM Calculations Examples 5 - 9
Excel
  16:05TVM in Excel I
  11:25TVM in Excel II
Tables
  20:36TVM Tables I
  23:15TVM Tables II
Continuous Play
  2:00:10Time Value of Money
SUPPORTING MATERIALS
  PDFSlides: Time Value of Money
  PDFTime Value of Money Glossary/Index
REVIEW and TEST
  quizREVIEW QUESTIONS
 examFINAL EXAM