This document provides instructions for responding to questions and solving problems relating to the time value of money concept in corporate and personal finance. Students are asked to: 1) Explain key concepts like cash flow, present value, and how interest rates affect present value. 2) Solve three computational problems showing work, either algebraically, using a calculator, or in a spreadsheet. Problems involve calculating account balances with different interest rates over time and future values of investments. 3) Recalculate rates of return assuming growth over different time periods.

1. Overview
Respond to three questions and solve three computational
problems about time value of money (TMV) as it applies to
single cash flow.
Time value of money (TVM) is the foundation of mathematical
finance. It is important to be able to demonstrate how the TVM
concept can be applied to corporate finance, as well as to
personal finances. It addition, knowing how to apply various
technical terms used in finance, such as discount rate, present
value, and future value, is a useful skill.
Assessment Instructions
Respond to the questions and complete the problems.
Questions
In a Word document, respond to the following. Number your
responses 1–3.
Explain the concept of cash flow in corporate finance.
Explain how present value and future values are related.
Explain how present values are affected by changes in interest
rates.
Use references to support your responses as needed. Be sure to
cite all references using correct APA style. Your responses
should be free of grammar and spelling errors, demonstrating
strong written communication skills.

2. Problems
In either a Word document or Excel spreadsheet, complete the
following problems.
You may solve the problems algebraically, or you may use a
financial calculator or an Excel spreadsheet.
If you choose to solve the problems algebraically, be sure to
show your computations.
If you use a financial calculator, show your input values.
If you use an Excel spreadsheet, show your input values and
formulas.
In addition to your solution to each computational problem, you
must show the supporting work leading to your solution to
receive credit for your answer.
Unless otherwise directed, assume annual compounding periods
in the computational problems.
If you deposited $250 in your savings account today, and the
bank pays 4 percent interest per year, how much would you
have in your savings account after 9 years?
Recalculate the account balance using a 6 percent interest rate
and a 7 percent interest rate.

3. A $450 deposit earns 6 percent interest in the first year, 3
percent interest in the second year, and 7 percent interest in the
third year. What is the future value at the end of the third year?
What is the annual rate of return for an $8,000 investment if in
five years it grows to $12,500?
Assuming the growth occurred in six years and then eight years,
recalculate the rate of return for these two scenarios.