Time Value of Money

Time Value of Money

Evaluate the effect time has on saved money

Students will be able to use the following equations

Rule of 72

Rate of Return

Dollar Cost Averaging

Multiple Choice

Who ends with more? A or B

• A

• B

Multiple Choice

How long would it take if you were earning 10%?

• 72 Years

• 10 Years

• 7.2 Years

• 5 years

Multiple Choice

How long would it take your money to double if you were earning 5%? About?

• 5 Years

• 10 Years

• 14 Years

• 20 Years

Multiple Choice

If you invest the $100 each month for 3 months and the price of the investment is $10, $20 and $25 what is your average price per share?

• $10

• $15.80

• $20

• $25

How did you know?

• How much did you spend?

• Total is $300 ($100 each month for 3 months)

• How many shares do you own?

• Total of 19 (Month 1 = 100/10=10, Month 2 = 100/20=5, Month 3=100/25=4)

• $300/19 = $15.8

• Buying same amount = habit so will keep doing it, gets rid of trying to 'time' the market, and protects from price drops since buy more when cheap = lowering your average price per share and making it not need to rise as much to gain your money back (if lost some)

Multiple Choice

If the price of the investment is $10, $20 and $25 what is the average selling price for that investment over 3 months.

• $15.80

• $18.33

• $20

• $25

​How do you know

​Assume 1 share bought at each price

​10+20+25 = 55

​Average over 3 months: 55 / 3 = $18.33

​

​This is what the news will report as the investment's average price

Multiple Choice

Let me borrow money. You give me $10 today and I promise to bring you back $15 tomorrow. What will your Rate of Return be?

• 0%

• 50%

• 100%

• 150%

50%

Start with $10

Ended with $15

15-10=5

$5 Gain

$5/$10 =.5

.5*100=50%

Multiple Choice

You invest $1,000. By the end you have $800. What was your rate of return?

• .2

• 20%

• -20%

• 80%