Assessment 2 Instructions: TVM – Single and Annuity Cash Flow

Answer questions and perform calculations related to single and annuity cash flows.

In this assessment, you will examine why a dollar received today is worth more than the dollar received tomorrow, learn the difference between compounding and discounting, and learn about annuities and amortization of loans. In other words, you will explore time value of money (TVM), which is the foundation of finance that deals with the mathematics behind the valuation of financial instruments such as stocks, bonds, and mortgages. 

It is necessary to be able to apply the knowledge you have gained by classifying market transactions and financial instruments and by describing how financial markets work.

Introduction

TVM is the foundation of mathematical finance that can be applied to corporate as well as personal finances. The TVM concept can be applied to single and multiple cash flows. However, in real life, you often come across financial applications that require multiple or annuity cash flows. In this assessment, you will apply the TVM concept to single and annuity cash flows.

Instructions

Complete and submit the Assessment 2 Template [XLSX].

Competencies Measured

By successfully completing this assessment, you will demonstrate your proficiency in the course competencies through the following assessment scoring guide criteria:

  • Competency 1: Analyze financial environments and concepts.
    • Explain the correct compounded interest choice.
    • Analyze a mortgage repayment strategy.
  • Competency 2: Apply financial computations and processes.
    • Complete five single cash flow calculations correctly.
    • Complete five annuity cash flow computations correctly.
  • Competency 3: Communicate effectively and professionally.
    • Convey clear meaning through appropriate word choice and usage.

RESOURCES:

 

Analyzing Cash Flow

  • Cornett, M., Adair, T., & Nofsinger, J. (2019). M: Finance (4th ed.). McGraw-Hill. Available in the courseroom via the VitalSource Bookshelf link.
  • https://courses.vitalsource.com/
  • https://capella.vitalsource.com/#/books/9781260139815/cfi/6/2!/4/2/2/2@0:0
    • The following chapters lay the foundation for mathematical finance, specifically dealing with the TVM concepts of single and annuity cash flows.
      • Chapter 4, “Time Value of Money 1: Analyzing Single Cash Flows.”
      • Chapter 5, “Time Value of Money 2: Analyzing Annuity Cash Flows.”
  • Time Value of Money – Part 1: The Big Picture.
    • Introduces the concept of TVM.
  • Time Value of Money â€“ Part 2: A Case Study at Bank One.
    • Examines the TVM in a case study.

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