Essay Example on Finance

Evaluate simple interest

A quick method that is used to calculate the loan charged on interest is known as simple interest. This interest charged on loans is attainable through multiplication of the principal by daily interest rate by all days that have elapsed in between the payments. This method of calculation applies to short-term loans or automobile loans.

Simple Interest = I*P*N

How to use Excel to evaluate future values, present values, rates, and time

If one has a thought of spending his or her hard earned money now to receive future payments, then he or she might think of either selling lottery tickets, making a loan or purchasing a bond or an annuity. Thus, before you decide on committing your money, you will love to know its value presently of your payments about what value you will be receiving shortly. Hence, that is all it pertains to present values, future values, their rates and time it will take. Excel can be used to calculate the future, present, rates and time value function of the above. Excel takes into consideration the original cost which is the net present value before determining the future values.

Why is the time value of money concept important? In what quantitative decisions might the time value of money be used?

The concept that money has is equated to its time value is deemed to be an insignificant element because it helps investors to comprehend the fundamental idea that states, the worthiness of the money we have today are more than the same money in the future. Since TVM is only a foundational perception in the field of finance that aids in the determination of our value of investments in the future, TVM is applicable mostly in quantitative decisions that underlie on the standard financial instrument and capital investments.

Difference between simple interest and simple discount.

Simple interest is that amount of money paid on the amount invested or borrowed and whatsoever not past interest. (Formulae: I= Prt). The simple discount has entailed the deduction of interest in advance from the money invested or loan, and its remaining balance channeled to the investor or borrower.

5. SAY SOMETHING ABOUT Benjamin,

I am on the fence with this concept but I do kind of invest to turn a bigger dollar in the future. I often reinvest in to my business to help it grow. I buy new vehicles and trailers to expand crews to be able to work in multiple states at the same time. So, I guess this is kind of the same concept of not holding on to the dollar today and investing into something and gaining a return on that investment. I just do not get interest on the loans that I give the company I actually gain on the profits that are made. I am told this is a bad way of doing business but it has worked out for the best so far.

Hi Benjamin:

Yes, Benjamin, it seems you're reaping big regarding profits from your business. The moment you invest big today the more, you will reap tomorrow. Profits will be guaranteed if you invest wisely. The way you are investing today cannot be termed to be professional since you are not incorporating the significant concepts of present and future values of the business. But despite not engaging the professional way of doing business, the bottom agenda is thriving well which results in making good profits. Profits are what every investor looks at, despite ignoring the professional concepts of doing business. Carry on so long the profits keep increasing.