Posted: February 12th, 2016

1. Your friend says, ‘I just got out of an accounting lecture about future value and present value. Frankly, I don’t have a clue what the professor was talking about, and

1. Your friend says, ‘I just got out of an accounting lecture about future value and present value. Frankly, I don’t have a clue what the professor was talking about, and we have a quiz on Wednesday. Help!’What would you tell your friend? How would you help him/her out? Clearly and concisely explain what is meant by the time value of money and what the terms future value and present value represent. Explain.

2. Your uncle offers you a choice of $20,000 in 50 years or $45 today. If money is discounted at 13 percent, which offer should you choose? Explain with details and computations. Suppose it is discounted at 10 percent, what will be your answer?