Time Value Money


The main TVM problems relating to healthcare are: a) present value of a lump sum b) present value of an annuity stream c) future value of a lump sum d) future value of an annuity stream. Provide an example of each of these TVM problems.


1) The Smith family is interested in buying a home. The family is applying for a $200,000 30-year mortgage. Under the terms of the mortgage, they will receive $200,000 today to help purchase their home. The loan will be fully amortized over the next 30 years. Current mortgage rates are 7.5%. Interest is compounded monthly and all payments are due at the end of the month. What is the monthly mortgage payment?



2) Miriam has saved $5,000 and intends to use his savings as a down payment on a new car. After careful examination of his income and expenses, She has concluded that the most he can afford to spend every month on his car payment is $425. The car loan that she uses to buy the car will have an APR of 10%. What is the price of the most expensive car that Henry can afford if he finances his new car for 48 months?