Upper Iowa University Time Value of Money Questions 1.short answer- Conduct an Internet search on the Time Value of Money tool. Summarize and discuss two r

Upper Iowa University Time Value of Money Questions 1.short answer- Conduct an Internet search on the Time Value of Money tool. Summarize and discuss two relevant articles on the topic. Be sure to include the links to the articles.Your response should be submitted in a Word document and be at least 250 words.

DB:

1.Explain the concept of the time-value-of-money. How can this be useful for companies and investors in making financial decisions? Provide an example TVM calculation.

2.Please respond to the below discussion thread. For your response, create a new thread at the top-level of the DQ 2 thread. If you don’t get the calculation right it’s not a problem. The goal is to go through a detailed TVM example as a class.

DQ 2 Question
Since we’re talking about applying the TVM to a lottery scenario let’s actually go through an example. Imagine the following scenario.

Congratulations! You just won the local lottery. You are given the choice of receiving either of the following:
i) $10,000 each year for the next ten years starting in one year, or
ii) a lump-sum payment today of $70,000.

You want to determine which is the preferable option, the annuity or the lump-sum payment today. To help you in your analysis your friend, Banker Brad, tells you that you could lock-in an interest rate of 4% for the next 10 years were you to make any investments this week. (Assume taxes and life-expectancy are not an issue.)

Which would you choose and why? What calculations would you use (i.e. applying the TVM) to determine your answer. (Calculate the present value of the annuity and then compare it to the lump-sum payment.)

Anyone who wants to take a stab at this feel free to post your thoughts. I’ll post my solution a little later in the week.

Just to summarize here, use the 4% as your discount rate for the TVM analysis and ignore things such as taxes and life-expectancy, etc. We want to really focus on the math of the TVM in this example.