Workshop Activity Worksheet: The TVM Challenge

Key TVM Variable Abbreviations

Use these abbreviations when configuring inputs and variables on financial calculators or in Excel formulas:

PVPresent Value

FVFuture Value

PMTPayment (Annuity)

I/YInterest per Period

NNumber of Periods

☕ Activity 1: The "Latte Factor"

Scenario: Sarah is a first-year BSAF student. She buys a specialty coffee and a pastry every single morning before class, costing her exactly $8 a day, 5 days a week ($40/week or roughly $160/month). Sarah wonders what would happen if she skipped the cafe and invested that $160 every month into an S&P 500 Index Fund that returns an average of 8% annually, compounded monthly.

Task 1: Calculate the Future Value (FV) of Sarah's monthly coffee money if she invests it for the next 10 years.
Task 2: How much of that final wealth is principal (Sarah's active cash) vs. compound interest (earned growth)?

Group Calc Workspace

N (months):

I/Y (monthly %):

PV (starting cash):

PMT (monthly savings):

Calculated Future Value (FV):

🗣️ Group Discussion Question: Is the convenience of buying coffee daily worth the lost future wealth? Discuss how tiny, everyday micro-expenses impact your long-term savings rate.

🚗 Activity 2: The Car Dealership Trap

Scenario: You've just graduated and secured a high-paying corporate finance role! You need a reliable vehicle and select a car costing $25,000. The dealership presents you with two financing paths:

• Option A: A 3-year (36 months) loan at a 4.5% annual interest rate.
• Option B: A 6-year (72 months) loan at a 6.5% annual interest rate (The salesperson strongly pushes this option because "the monthly payment is so much lower!").

Task 1: Calculate the monthly payment (PMT) for Option A and Option B.
Task 2: Calculate the total payments and total interest paid over the life of each loan.

Group Calc Workspace

Option A PMT:

Option A Total Interest:

Option A Total Cost:

Option B PMT:

Option B Total Interest:

Option B Total Cost:

🗣️ Group Discussion Question: Why do dealerships aggressively promote long-term loans with high amortization schedules? As a finance professional, which loan would you select and why?

💰 Activity 3: The Millionaire Blueprint

Scenario: Let's mathematically reverse engineer a millionaire. You are currently 20 years old and set a firm goal to accumulate exactly $1,000,000 in your retirement portfolio by age 60 (40 years from now). You plan to invest in a low-cost stock index fund with an average annual yield of 9%, compounding annually.

Task 1: Calculate the required annual savings (PMT) to reach the target $1M goal starting at age 20.
Task 2: What if you delay by 10 years and start saving at age 30 instead (giving you 30 years to compound)? Recalculate PMT.

Group Calc Workspace

Target Amount (FV):

Annual Return (I/Y):

Retirement Age:

Annual Contribution (Starting at 20 - 40 Years to grow):

Annual Contribution (Starting at 30 - 30 Years to grow):

🗣️ Group Discussion Question: Compare the annual savings required for age 20 vs. age 30. How does a 10-year delay mathematically explain the "cost of waiting" and compound acceleration?

🛠️ Workshop Activity Worksheet: The TVM Challenge

☕ Activity 1: The "Latte Factor"

🚗 Activity 2: The Car Dealership Trap

💰 Activity 3: The Millionaire Blueprint