Using the Time Value of Money to Make Financial Decisions

Learn about the time value of money to figure out loan payments, save for college and retirement, buy a house, lease or purchase a car, and make long-term business decisions.

Introduction

• Making financial decisions

1. Time Value of Money Overview

• The time value of candy
• Overview of the time value of money terms
• Common time value of money misunderstandings

2. Impact of Internet Rate and Compounding Period

• Columbus and the power of compounding
• The impact of interest rates
• The impact of compounding periods

3. Doing Time Value of Money Computations with a Business Calculator

• The time value of money when buying a car
• Using business calculators
• Computing a car payment with a business calculator
• Computing a house payment with a business calculator
• Computing a house payment with a balloon payment at the end
• Computing the amount you can afford to borrow

4. Doing Time Value of Money Computations with Excel

• Mortgage amortization schedules
• Finding Excel financial functions
• Computing a car payment using Excel
• Computing a house payment using Excel
• Using Excel to construct a loan amortization schedule
• Computing an effective interest rate using Excel

5. Savings and Retirement

• Start saving early
• Growth in savings and the rule of 72
• Saving for a target amount for a house
• The importance of starting to save for retirement now

Review and Conclusion

• Time value of money dangers: A payday loan
• Where to go from here