The question describes a series of equal payments of $5,000 growing at 6% per year for four years. Taking the information provided in this question, let’s analyze what type of time value of money (TVM) problem this is. When Chuck graduates from college in four years, how much money will he receive from his uncle? Chuck’s uncle places $5,000 into an investment account earning 6% at the beginning of each year.
For our first post in this series we present a classic time value of money (TVM) problem involving annuities.Ĭhuck Moyer, who is currently attending college, has a rich uncle who has decided to put aside some money each year for Chuck so when he graduates he’ll be able to pay off his college loans. Our goal with this series is to provide you with a practical framework for identifying and understanding situations where these business and financial concepts are used. Business and Finance Math is an ongoing series produced by Calcblog to present topics and concepts found in the world of business and finance.
