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    Time Value of Money

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    ERICKA GRACE DA SILVA
    The document discusses the time value of money concept, which is that money available now is worth more than the same amount in the future due to its potential earning capacity. It defines key terms like present value, future value, interest, simple interest, and compound interest. Formulas are provided for calculating present and future value using different interest rates and time periods. A TVM calculator link is included, and a timeline and sample problem are presented to illustrate TVM principles.

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    Time Value of Money

    Uploaded by

    ERICKA GRACE DA SILVA
    56 views11 pages
    The document discusses the time value of money concept, which is that money available now is worth more than the same amount in the future due to its potential earning capacity. It defines key terms like present value, future value, interest, simple interest, and compound interest. Formulas are provided for calculating present and future value using different interest rates and time periods. A TVM calculator link is included, and a timeline and sample problem are presented to illustrate TVM principles.

    Original Title

    Time Value of Money (1)

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    The document discusses the time value of money concept, which is that money available now is worth more than the same amount in the future due to its potential earning capacity. It defines key terms like present value, future value, interest, simple interest, and compound interest. Formulas are provided for calculating present and future value using different interest rates and time periods. A TVM calculator link is included, and a timeline and sample problem are presented to illustrate TVM principles.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    56 views11 pages

    Time Value of Money

    Uploaded by

    ERICKA GRACE DA SILVA
    The document discusses the time value of money concept, which is that money available now is worth more than the same amount in the future due to its potential earning capacity. It defines key terms like present value, future value, interest, simple interest, and compound interest. Formulas are provided for calculating present and future value using different interest rates and time periods. A TVM calculator link is included, and a timeline and sample problem are presented to illustrate TVM principles.

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    TIME

    VALUE
    OF
    MONEY
    October 6, 2021
    Time Value of Money
     the idea that money available now is worth more than the
    same amount that will be available in some future date.
     founded on the principle that money has earning capacity.
     an important concept applied in financial and investment
    decisions. The two prime considerations are interest
    compounding and discounting.
    Definition of terms
    • Present value or PV - the current value of a sum of money or streams of cash flow
    expected to be received in the future discounted using a given rate of return.
    • Future value or FV - the expected value in the future of a sum of money or cash on
    hand compounded using a given rate of return.
    • Time periods - represented by 0, 1, 2, and 3. It could be in days, weeks, months, or years.
    Time 0 is the beginning of period 1. Therefore, 1 represents the end of period 1 and the
    beginning of period 2.

    • Interest - the amount earned when money is loaned to someone else or is invested in
    a financial product that promises earnings after a certain period of time. The most common
    type of interest that most people are familiar with is the interest earned on money that is
    saved in a bank. Interest may be simple or compound.
    Definition of terms
    • Simple interest - occurs when there is no interest earned on top of
    interest that was earned in the previous periods.
    • Compound interest - occurs when interest is earned on the
    interest that was earned from the previous periods.
    • Annuity - a series of equal payments at fixed intervals for a
    specified number of periods.
    • Perpetuity - a stream of equal payments at fixed intervals
    expected to continue forever.
    Simple VS Compound Interest
    Present Value Formula
    Future Value Formula
    TVM Calculator

    https://www.gigacalculator.com/calculators/time-
    value-of-money-calculator.php
    Time line
    Sample problem

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