# Worksheet Assignment | Homework Help Websites

Everyday we choose one financial decision over another. Should we buy a cup of coffee or should we save that money? What is the personal and financial cost to us? In this assignment you determine the time value of money and examine opportunity cost, among other fundamentals of economics and finance.

Save Time On Research and Writing
Hire a Pro to Write You a 100% Plagiarism-Free Paper.

## Time Value of Money, Opportunity Cost, and Income Taxes Worksheet

Scenario 1: Time Value of Money / Cash Management Products

1. Use this Bankrate’s Simple Savings calculator to complete Scenario 1: http://www.bankrate.com/calculators/savings/simple-savings-calculator.aspx. You will enter the Initial Amount of Savings (Present Value), Annual Interest Rate (Rate of Return), and Number of Periods/Years into the calculator. The calculator will compute the Future Values.

In this scenario you will look at the impact of interest rates on your savings. Suppose that you have \$2,000 of savings. You don’t anticipate needing to dip into these funds in the next five years. Based on the information provided in the table, calculate the future value (FV) of \$2,000 at the end of years 1 and 5 if it were to be completely invested in each of the different cash management products.

Enter your answers in the indicated cells of the table below. The Restrictions/Fees on Product Usage column relates to question 2 of Scenario

Save Time On Research and Writing
Hire a Pro to Write You a 100% Plagiarism-Free Paper.

1.

 Product Annual Interest Rate Restrictions/Fees on Product Usage FV at end of Year 1 FV at end of Year 5 Checking Account 0.00% · No minimum · No limit on withdrawals Answer: \$2,000 Calculator Inputs: Initial Amount: \$2,000 Annual Interest Rate (compounded quarterly): 0.00% Number of Years: 1 Answer: \$2,000 Calculator Inputs: Initial Amount: \$2,000 Annual Interest Rate (compounded quarterly): 0.00% Number of Years: 5 Savings Account 1.50% · No minimum · Limited to 3 withdrawals per month Answer: \$2,030.17 Calculator Inputs: Initial Amount: \$2,000 Annual Interest Rate (compounded quarterly): 1.50% Number of Years: 1 Answer: \$2,155.47 Calculator Inputs: Initial Amount: \$2,000 Annual Interest Rate (compounded quarterly): 1.50% Number of Years: 5 Certificate of Deposit (CD) 5% · \$500 minimum balance · Early withdrawal penalty: 180 days of interest plus \$25 Answer: \$2,101.89 Calculator Inputs: Initial Amount: \$2,000 Annual Interest Rate (compounded quarterly): 5% Number of Years: 1 Answer: \$2,564.07 Calculator Inputs: Initial Amount: \$2,000 Annual Interest Rate (compounded quarterly): 5% Number of Years: 5

2. Based on your calculations and on all you have learned this week, how would you choose to save your \$2,000? Consider things such as rate of return, inflation, taxes, liquidity, safety, restrictions, and fees, and explain the rationale for your decision. Respond in at least 50 words.

<Write response here.>

Scenario 2: Time Value of Money / Compounding Interest

3. Use this Bankrate’s Simple Savings calculator to complete Scenario 2: http://www.bankrate.com/calculators/savings/simple-savings-calculator.aspx. You will enter the Initial Amount of Savings (Present Value), Annual Interest Rate (Rate of Return), Interest Compounded, and Number of Periods/Years into the calculator. The calculator will compute the Future Values.

In this scenario you will start with a big deposit and see how interest, compounding, and time will change the balance over time. Suppose that you inherit \$10,000 from your late uncle. You save this money and do not deposit any more money to the account. Determine how much money you would have at the end of each of the periods for each of the scenarios in the table below, assuming that you don’t make any withdrawals from the account over the period.

4. Based on your calculations above, explain in your own words the impact of compounding interest.

<Write response here.>

Scenario 3: Cost of Credit / Opportunity Cost / Trade-Offs

5. In this scenario you will calculate the monthly payment and total interest paid on a car loan. Suppose that you need \$15,000 to buy a used vehicle to get back and forth to work and school. You have \$7,500 in a money market fund earning 1.00% per year, but you are not sure you want to use any or all of that money.

Using the tables in Exhibit 1-D, located on pp. 42-43 in the Ch. 1 Appendix of Focus on Personal Finance, determine the total amount of payment due at the end of each year, and divide by 12 to estimate the monthly payment for each of the following loan scenarios. Also, calculate the total amount of interest you would pay over the life of each loan. Be sure to show your work for opportunities to earn partial credit, where applicable.

For example, if you have the correct formula but put a decimal in the wrong spot you could earn partial credit. The first row in the table has been completed to demonstrate you how work can be shown.

 Loan Amount Interest Rate Term Monthly Loan Payment = Amount Borrowed divided by “Table Factor in Exhibit 1-D” divided by 12 Total Amount of Interest = (Monthly Loan Payment * Term * 12) – Loan Amount \$7,500 6% 3 years Example: 7500/2.673=2,805.84 2,805.84/12= 233.82 Example: (233.82*3*12) – 7,500= 917.52 \$7,500 6% 5 years 7,500/4.329=1,732.50 1,732.50/12=144.38 (144.38*5*12)=8,662.80 8,662.80-7,500=1,162.80 \$10,000 6% 5 years 10,000/4.329=2,310.00 2,310.00/12=192.50 (192.50*5*12)=11,550.00 11,550.00-10,000=1,550.00 \$15,000 6% 5 years 15,000/4.329=3,465.00 3,465.00/12=288.75 (288.75*5*12)=17,325.00 17,325.00-15,000=2325.00

6. Based on the above calculations, the price of the car, and the money available in a money market fund, which loan option would you suggest to someone purchasing a vehicle? Please explain the rationale and considerations for your decision.

I would recommend the third loan, \$10,000 at 6% over 5 years and use \$5000 from the money they have in the money market fund. The person in this example is in school and probably has other expenses so the payment would be low and they would have \$2500 left for other expenses from their money market fund. In the end they would pay a little more in interest than the first and second loan but not much more. Ideally, if their personal finances would allow it, loan number one would be great because they would not pay much interest at all but the monthly payment would be much higher than the others.

7. In your own words, how would you summarize “opportunity cost”? How does the concept of opportunity cost apply to this decision? Explain in a brief paragraph.

Opportunity cost is basically weighing out all your options and choosing the best choice at that particular time. The gain lost from making this choice over another option is “opportunity cost”. It could be a gamble in some instance but one must take all factors into consideration. It applies in this decision because the person must choose to either continue saving the \$7500 they have invested or use it towards the purchase of a new car. Taking out a loan would let him keep part or all of the money he has invested or he could use it all and pay a smaller loan off faster. It’s a personal decision that one must make with information gathered beforehand.

Income Taxes

Each year you will need to file a federal income tax return by April 15th. While you may use software or a tax preparation professional to help you complete your return, there are still some terms of which you should have a basic understanding. Respond to the following to demonstrate your understanding. Each response should be at least 50 words.

8. Explain the differences between taxable income and adjusted gross income.

<Write response here.>

9. In your own words, define tax deduction, exemption, and tax credit.

<Write response here.>

Calculate the price
Pages (550 words)
\$0.00
*Price with a welcome 15% discount applied.
Pro tip: If you want to save more money and pay the lowest price, you need to set a more extended deadline.
We know how difficult it is to be a student these days. That's why our prices are one of the most affordable on the market, and there are no hidden fees.

Instead, we offer bonuses, discounts, and free services to make your experience outstanding.
How it works
Receive a 100% original paper that will pass Turnitin from a top essay writing service
step 1
Fill out the order form and provide paper details. You can even attach screenshots or add additional instructions later. If something is not clear or missing, the writer will contact you for clarification.
Pro service tips
How to get the most out of your experience with Homework Writing Services
One writer throughout the entire course
If you like the writer, you can hire them again. Just copy & paste their ID on the order form ("Preferred Writer's ID" field). This way, your vocabulary will be uniform, and the writer will be aware of your needs.
The same paper from different writers
You can order essay or any other work from two different writers to choose the best one or give another version to a friend. This can be done through the add-on "Same paper from another writer."
Copy of sources used by the writer
Our college essay writers work with ScienceDirect and other databases. They can send you articles or materials used in PDF or through screenshots. Just tick the "Copy of sources" field on the order form.
Testimonials
See why 20k+ students have chosen us as their sole writing assistance provider
Check out the latest reviews and opinions submitted by real customers worldwide and make an informed decision.
SEO
good
Customer 463813, April 18th, 2023
SEO
Well researched on and all the instructions followed.
Customer 463869, March 24th, 2023
Very well done, thank you!
Customer 462533, February 6th, 2022
Entertainment & Gaming
Avoid plagiarism.
Customer 452441, April 12th, 2022
Retail
Good
Customer 463469, October 18th, 2022
Psychology
Good discussion.
Customer 462359, April 4th, 2022
Good work!
Customer 463469, October 29th, 2022
Military
Excellent work
Customer 456821, June 22nd, 2022
Healthcare & Medical
Good content and organization.
Customer 452441, April 13th, 2022
CRITICAL REAFING AND WRITING
Be keen on instructions.
Customer 460653, April 6th, 2022
Psychology
The paper was beautifully written with minor errors. Once again my expectations have been exceeded. Thank you to the writer for a beautifully written paper and thank you to the customer service department for ensuing the work of the highest quality.
Customer 452455, April 29th, 2023
Excellent
Customer 460073, July 2nd, 2022
11,595
Customer reviews in total
96%
Current satisfaction rate
3 pages
Average paper length
37%
Customers referred by a friend