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# Time Value of Money: Annuity Cash Flow (Example)

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TVM: Annuity Cash Flow Name Institutional Affiliation Professor’s Name Date Submitted Questions Explain whether you would you rather have a savings account that paid interest compounded on a monthly basis or compounded on an annual basis? Why? The best savings account that I would prefer is the one that compounds interest on a monthly basis rather than that which compounds on an annual basis. The reason for choosing the initial one is because the compounding that takes place the more returns obtained. For the yearly savings account the interest is only acquired at the end of the year while for the other one an individual gets to enjoy the interest returns on a monthly basis. Therefore the accumulation of the returns assists in growing the returns and thus providing an excellent opportunity for a person to benefit from the operations in place. It is therefore advisable to choose a 11 percent and 12 percent. Period = 14 years Discount rate = 11% R = \$1 150 PV =? PV = R/I [1- 1/ (1+ i) n ] = 1150/0.11 [1-1/ (1+ 0.11)14] = 10 454.5455 x 0.7680 = \$8 029.09 Period = 14 years Discount rate = 12% R = \$1 150 PV =? PV = R/I [1- 1/ (1+ i) n ] = 1150/0.12 [1-1/ (1+ 0.12) 14] = 9583.3333 x 0.7954 = \$7 622.58 References Raible D. G. Teti R. &amp; Brinker Jr T. M. (2016). When Is Home Mortgage Interest Expense Deductible?. Journal of Financial Service Professionals  70(1) 11-15. Motley Fool Staff. (2016 January 31). What Is the Difference Between an Annuity Due vs. an Ordinary Annuity? Retrieved from www.fool.com The Guardian. (2016 May 10). Do you get more interest monthly or annually? Retrieved from www.theguardian.com Fontinelle  A. (2017 March 14). Amortization Schedule. Retrieved from https://www.investopedia.com/terms/a/amortization_schedule.asp [...]

## Order Description:

Respond to four questions and solve three computational problems about time value of money (TMV) as it applies to annuity cash flows. APA Format and cited all material.

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01.05.2018

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