Unit 3 Discussion: The Time Value of Money needs to be 2 paragraphs
Long-term investment decisions extend beyond one year, and perhaps for many years. Any investment requires careful research and planning, but long-term investments require intensive planning. Investment decisions must also consider risk. The longer the time frames, the larger the risk. Areas of risk and uncertainty include annual costs and inflows, product life, interest rates, economic conditions and technological change.
Based on the concept of the time value of money, this discussion will allow you as individuals to consider some potential investments. Using the concepts learned in this class, compile data and develop an investment model for one of these projects:
- Purchasing a home – Discuss the relevance of the purchase price, the interest rate and the term of the mortgage loan. Show the first 5 years of an amortization table and discuss how the payment would change if one or more of the variables were different, i.e. if a 15-year mortgage were selected instead of a 30-year mortgage, or if a different interest rate were used. Which configuration of variables produces the best scenario?
- Saving for retirement – Discuss the significant differences between bonds or savings accounts as investment choices. Explain how compounding can affect the outcome of your investment. Give an example of how a modest $1000 investment could grow over time, and compare that with the results if money were invested periodically over time, rather than all at once up front, say $100/year for ten years. Which investment makes the most sense?
Some other important considerations are:
- How will inflation, depreciation or increase in value affect your plan?
- Should the method and costs of financing the project be part of the analysis?
- Are there any tax advantages to one investment or another?
You will need to do some research for this forum assignment. Remember to properly cite your resources using APA format.
Long-terminvestment plan 1 Discussion: Time value of money in long term investment using the scenario like saving forretirementPast the things they might require or need either now or sooner…