Students in introductory Financial Accounting frequently fail to appreciate the importance of time-value-of-money. They simply view time-value-of-money as a ‘memorize the formulas’ and plug in the numbers to solve a mathematical problem. The students frequently fail to ‘recognize’ the key information given in the problem and what is the ‘unknown’ they need to solve for. We use the following three techniques to: pique students interest in the topic, help students understand the ‘whys’ behind the calculations, and enable the students to solve many time-value-of-money problems without complex mathematical formulas or financial calculators: 1.) Investing for Retirement situations to illustration the ‘power’ of time-value-of-money, 2.) Television game show “Let’s Make a Deal” to identify factors underlying the determination of interest rates, 3.) “Time-line diagram”” and “”simple”” formulas.

This article is from the Accounting Instructors’ Report, an electronic journal that provides teaching tips and insights to those who teach accounting and other business courses.

Contributors:
Robert Derstine, Kutztown University
Thomas Grant, Kutztown University

Read Time-Value-of-Money—“Let’s Make a Deal”, Time-Line Diagrams and ‘Simple’ Formulas, and a Bond Pricing Example.