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-   -   Finance Question - 20 bucks via paypal to the first one who answers it! (https://gfy.com/showthread.php?t=149218)

BlueDesignStudios 07-02-2003 09:06 PM
Quote:
Originally posted by Rick Latona
I never imagined that this thread would be one post away from a third page.
Any question always brings out the experts of GFY. Page 3!

SweetT 07-02-2003 09:09 PM
Quote:
Originally posted by BlueDesignStudios

Any question always brings out the experts of GFY. Page 3!

Speak for yourself....I was going for the 20 bucks :Graucho


--T

BlueDesignStudios 07-02-2003 09:10 PM
Quote:
Originally posted by SweetT



Speak for yourself....I was going for the 20 bucks :)


--T
Hahah LOL - as was I, and I was working damn hard for it all over the first two pages :)

High Quality 07-02-2003 09:15 PM
The USDollar will crash within the next 15 years (see Post WWI germany and photos of children playing with stacks of money), so your contract is worth whatever you think you can get in the next 15 years.

Good luck.

BTW, now is the time to buy a house on a huge ass mortgage. :)

BradShaw 07-02-2003 09:17 PM
Stuff like this is why I employee a CPA and finanical advisor. Way over my head, heck I failed algebra!

FlyingIguana 07-02-2003 09:58 PM
Quote:
Originally posted by Rick Latona
Ok,

The question is regarding the time value of money. I need to know which is more valuable, why and what formula was used to determine the answer.

A. 2,250 dollars a month for 40 years.
B. 2,750 dollars a month for 18 years.

Use 8% as an interest rate and tell me what each contract is worth today in a lump sum.
do you still need to know? i haven't looked through the thread. if you do i can tell you in a second

Imageauction 07-02-2003 10:01 PM
DOH! misread the question!

Rick Latona 07-02-2003 10:02 PM
The answers in this thread make me wonder if anyone understands what Visa means by 1%.

4Pics 07-02-2003 11:03 PM
Is this for a Home or Building or is this for something on the internet?

FlyingIguana 07-02-2003 11:22 PM
Quote:
Originally posted by Lenny2
In order to figure the time value of money you need a number to use for inflation right?
that would be included in the required rate of return

Kimmykim 07-02-2003 11:27 PM
Quote:
Originally posted by Rick Latona
The answers in this thread make me wonder if anyone understands what Visa means by 1%.
Dont think those mofo's aint on the down payment plan for one second baby ;)

FlyingIguana 07-02-2003 11:28 PM
Quote:
Originally posted by WiredGuy
The formula you would use is:
A = P(1 + r/100)^t

Where A = Amount, P = Principle, R = Interest Rate per annum and t = time in years. But you mentioned you're adding money every month, so the above will give you per annum so the interest will be off by a bit but should be close enough to compute the difference.

The actual formula you would use would depend when interest is computed, so say interest is paid out N times per year then you adjust the formula to this:
A = P[1 + r/(N * 100)]^(Nt)

Where N = number of times per annum interest is paid.

I'll stick to the easy case...

So, Contract A: $2250 * 12 = $27,000 per year
So, Contract B: $2750 * 12 = $33,000 per year

Contract A = $27000*(1.08) ^ 40 = $586,562.08
Contract B = $33000*(1.08) ^ 18 = $131,868.64

Contract A would win.

But remember the numbers are not exact since you can't do $2250 * 12 really since it depends when interest is computed. If interest is computed continiously, that gets even uglier...

Hope this helps Bobble Head :)
WG
lets take A and assume annual compounding.
n=40
i=8
pmt=27000

so pv=321,964.56

monthly compounding would be 323,595.88

FlyingIguana 07-03-2003 12:50 AM
Quote:
Originally posted by traffic addict
Hi Rick as you said

So here it is again just for you

The numbers that you see in my formula are present value, if you want to know the value in the end of the period you need to use a deferent Formula, but it doesn't mater any way, because you need to know what is the best offer, and the best way to check it out is by using the present value of the offer.

there is no logic in checking what will be the value of a in another 40 years and to comper it to the value of b in another 18 years.

You need to bring bouth offers to the same date, and that is why you are useing the present value formula.

you can trust me, I have an MBA from Wharton
your numbers are wrong, the pv of a is over 300k. its pretty simple stuff.

Kimmykim 07-03-2003 01:30 AM
Risk level.

Can I say it louder?

RISK LEVEL.

Will Sweet T say it with me?

risk level.

The only thing that maybe cant be hurt is dirt.


Watch the insurance clauses in your investment properties. Very closely.

Carrie 07-03-2003 03:11 AM
My brain hurts.
At this point I simply want to see the house that is worth this much payment per month. Pictures?

Maca 07-03-2003 06:19 AM
Linear thought: If the question really is which is more VALUABLE then it doesn't really matter what interest you apply:

The simple answer is the more valuable is A; 2250 x 12 x 40 = 1,080,000

B; 2750 x 12 x 18 = 594,000

Rick Latona 07-03-2003 09:10 AM
Quote:
Originally posted by Kimmykim
Risk level.

Can I say it louder?

RISK LEVEL.

Will Sweet T say it with me?

risk level.

The only thing that maybe cant be hurt is dirt.


Watch the insurance clauses in your investment properties. Very closely.
My friend, you are always right. I'm not sure that I like you so much. Especially since I didn't get invited to your party. :(

FlyingIguana 07-03-2003 09:11 AM
Quote:
Originally posted by Maca
Linear thought: If the question really is which is more VALUABLE then it doesn't really matter what interest you apply:

The simple answer is the more valuable is A; 2250 x 12 x 40 = 1,080,000

B; 2750 x 12 x 18 = 594,000
if you want to know what the value of the future cash flows are today then you need a discount rate...

Jeffery 07-03-2003 09:51 AM
You say an 8% interest? Does this mean that NONE of the monthly stipend is spent (All goes into the bank). Meaning the previous years stipend + interest goes into the bank and the current year's interest is calculated from the new total?

Are you looking for the value of the contracts at their closure with all interest computed or the value of each contract after 40 years with all interest computed?

Should be pretty easy to figure up in either case.

Rick Latona 07-03-2003 09:55 AM
Quote:
Originally posted by Jeffery
You say an 8% interest? Does this mean that NONE of the monthly stipend is spent (All goes into the bank). Meaning the previous years stipend + interest goes into the bank and the current year's interest is calculated from the new total?

Are you looking for the value of the contracts at their closure with all interest computed or the value of each contract after 40 years with all interest computed?

Should be pretty easy to figure up in either case.
At this point we have most of it figured out. The issue is that there is an exchange of an asset for one of the two contracts. The challenge is to determine which contract has greater value by converting the contracts into today's value.

FlyingIguana 07-03-2003 09:59 AM
Quote:
Originally posted by Rick Latona


At this point we have most of it figured out. The issue is that there is an exchange of an asset for one of the two contracts. The challenge is to determine which contract has greater value by converting the contracts into today's value.
someone already gave those numbers. contract A looked better. but i would use a larger discount rate because of the length. 8% imo should only be used for less than 5 years. at least 10% imo.

the calculation you asked for is mickey mouse. its like adding 1+1

Rick Latona 07-03-2003 10:46 AM
Quote:
Originally posted by FlyingIguana


someone already gave those numbers. contract A looked better. but i would use a larger discount rate because of the length. 8% imo should only be used for less than 5 years. at least 10% imo.

the calculation you asked for is mickey mouse. its like adding 1+1
Have you looked at the banner in my sig?

Kimmykim 07-03-2003 12:28 PM
Quote:
Originally posted by Rick Latona


My friend, you are always right. I'm not sure that I like you so much. Especially since I didn't get invited to your party. :(
Hey now, you KNOW you are always welcome anywhere I am, so don't even try that.

Now go to the airport and I'll see you when it's time to throw the ribs on the grill :)

FlyingIguana 07-03-2003 01:49 PM
Quote:
Originally posted by Rick Latona


Have you looked at the banner in my sig?
i try not to


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