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REQUIREMENTS: (As close to 400 words if possible.) Why is time value of money important to investors? There are 5...

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Finance

REQUIREMENTS:

(As close to400 words if possible.)

Why is time value ofmoney important to investors?

There are 5 componentsof All Time Value of money problems. The first one is number ofcompounding periods, what are the other 4 components?

You have decided tobuy a car, the price of the car is $18,000. The car dealer presentyou with two choices:

(A) Purchase the carfor cash and receive $2000 instant cash rebate - your out of pocketexpense is $16,000 today

(B) Purchase the carfor $18,000 with zero percent interest 36-month loan with monthlypayments.

Market interest rateis 4%. Which option above is cheaper? How much do you save?

Answer & Explanation Solved by verified expert
3.6 Ratings (497 Votes)
Time Value of money is very important as the value of moneydepreciate at risk free rate over the time For taking up a projectyou additional risk and so    See Answer
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Transcribed Image Text

REQUIREMENTS:(As close to400 words if possible.)Why is time value ofmoney important to investors?There are 5 componentsof All Time Value of money problems. The first one is number ofcompounding periods, what are the other 4 components?You have decided tobuy a car, the price of the car is $18,000. The car dealer presentyou with two choices:(A) Purchase the carfor cash and receive $2000 instant cash rebate - your out of pocketexpense is $16,000 today(B) Purchase the carfor $18,000 with zero percent interest 36-month loan with monthlypayments.Market interest rateis 4%. Which option above is cheaper? How much do you save?

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