Why is the time value of money an important concept in financial planning

1
Why is the time value of money an important
concept in financial planning?
2
Why is the time value of money an important
concept in financial planning? allows us to
see the relationship between time and the value
of accumulated sums of money.
3
Describe the effects of compound interest.
4
Describe the effects of compound interest.
Earning interest on interest
5
Describe the two factors that affect how much we
need to save to achieve financial goals.
6

• Describe the two factors that affect how much we
  need to save to achieve financial goals.
• interest rate
• time period

7
What are some practical uses of present and
future values?
8

• What are some practical uses of present and
  future values?
• PV tells us how much to set aside for a given
  interest rate to realize some future value
• FV tells us how much an amount set aside today
  can grow to over time

9
List at least five common examples of annuities.
10

• List at least five common examples of annuities.
• Bond interest payments
• mortgage payments
• monthly savings to reach a college education
  expense goal
• insurance contracts
• retirement plans

11
Define an amortized loan and give two common
examples.
12
Define an amortized loan and give two common
examples. An amortized loan is a loan paid off
in equal installments. Two common examples are
auto loans and home mortgages.