Skip to content. The ALT text used on graphical equations is similar to, but not exactly like Math Speak; a few conventions are borrowed. Exponents are read as supe followed by the exponent then base to signify terms representing the exponent have ended. Subscrpts are read as sub followed be the subscript, then base. Parenthesis are read in line as they occur: left parens opens the parenthetical and right parens closes it. Square brackets are read as left bracket then right bracket. Fractions are always read as numerator followed by denominator. One half would be numerator one denominator two.

## Different Types of TVOM

### Practice

#### Practice Question 1:

#### Solution:

To solve each problem follow these steps:

- Create a time line
- Identify type of cash flows and
- Identify the appropriate equation needed to solve a problem.

Note: The solution to each problem is given.

Tyler won a lottery. The commission asked him to choose between $10,000 today and $20,000 three years from today. Which option should Tyler take if his investment opportunity is 10% annually compounding?

$10,000 is today's value while $20,000 is the value three years from today. In order to choose between these two options, you need to convert $20,000 to be today's value so that it can be compared to $10,000.

Step 1- Create a Timeline:

Step 2- Identify the type of cash flow: Since $20,000 is only one cash flow amount on the time line, the type of cash flow is lump sum.

Step 3- Select the appropriate equation: We can also see that the present value of $20,000 is needed. The equation for the problem is present value of lump sum:

Step 4- Enter the variables in the equation and solve: FV = $20,000 (value at the end); r = 10% (investment opportunity); t = 3 (compounding periods)