1. Why should we (managers) learn calculations involving the time value of money? What kind of management decisions does it help us make?
2. Emily Smith deposits $1,200 in her bank today. If the bank pays 4 percent simple interest, how much money will she have at the end of five years? What if the bank pays compound interest? How much of the earnings will be interest on interest?
3. Multiple compounding periods: Find the future value of a five-year $100,000 investment that pays 8.75 percent and that has the following compounding periods:
Yearly
Monthly.