Time Value Of Money And Risk Analysis
Annuities # 2
Time Value of Money (TVM)
Understanding how the time value of money works can be most easily explained by taking your initial investment let us say $10 by the end of year five it could be worth $100. This means you have earned $90 in the last five years. Next year, you invest $10 and at the end of year five it is worth $80 because interest has not accumulated on the time that was lost between year 1 and year 2. My example of this is that my fiancé put $3000 in each of his children's name when they were born, by the time they are ready to attend college or serve a mission; there should be enough money in there to pay for a large portion of that. I am currently working on investing this for my three children ages; 11, 6, and 3. I must put in a larger dollar amount in my 11 year old account so that she may end up equal to my three year old.
Interest Rates and Compounding
Interest Rate Risk should be evaluated any time that you invest money. Where......
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