Home Mortgage Refinancing Decision

Running head: TIME VALUE OF MONEY
TIME VALUE OF MONEY
Name of the Student
Name of the University
Author Note:

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TIME VALUE OF MONEY
Table of Contents
Answer to Question 1......................................................................................................................2
Answer to Question 2......................................................................................................................3
Answer to Question 3......................................................................................................................4
Answer to Question 4......................................................................................................................4
Reference.........................................................................................................................................6

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TIME VALUE OF MONEY
Answer to Question 1.
Saving accounts is basically a bank account that allows you to deposit money, withdraw
funds, and provides principal security, apart from giving a modest rate of interest. Such accounts
are held at a financial institution. Typically, the borrowers prefer less recurrent compounding
periods while the savers prefer more recurrent compounding periods.
In monthly compounding, the banks will calculate interest from the account only once per
month, while in yearly compounding, the bank will calculate interest once per year. To find out
which compounding method is better, let us assume that a principal payment of $5000 is
deposited into a savings account.
Again assuming that the same amount is invested in the savings account but the interest is
compounded monthly then the interest will be: