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Time Value Intro

Time Value Intro - $100.00 P My Savings Account balance is...

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Time Value of Money Introduction Assume I deposit $100.00 today in a savings account. My Savings account pays interest at a rate (i) equal to 6% per year. How much will I have in my savings account after a period of 1 year? Answer: The Period is 1 Year 1 N The INTEREST I earn is $100.00 * 6% or: $6.00 I Plus I have my original DEPOSIT of:
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Unformatted text preview: $100.00 P My Savings Account balance is: $106.00 F The point here is that $100 today is not equal to $100 one year from now. Would you loan me $100 if I promised to repay you $100 one year from now? Probably not!! Why? Because I would deposit the $100 earn $6 then repay you $100....
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