Scribd
Upload
57 views3 pages

Time Value of Money Means Today

The document discusses the time value of money, which means that money available now is worth more than the same amount in the future due to factors like inflation, risk, and consumption preferences. It defines present value (PV) as today's worth of a future cash flow, and future value (FV) as the worth of today's cash flow in the future. There are three types of cash flows: single, equal/annuity, and mixed cash flows. Formulas are provided for calculating PV and FV for single and equal cash flows using interest rates over periods of time.

Uploaded by

Nahidul Islam IU
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
57 views3 pages

Time Value of Money Means Today

The document discusses the time value of money, which means that money available now is worth more than the same amount in the future due to factors like inflation, risk, and consumption preferences. It defines present value (PV) as today's worth of a future cash flow, and future value (FV) as the worth of today's cash flow in the future. There are three types of cash flows: single, equal/annuity, and mixed cash flows. Formulas are provided for calculating PV and FV for single and equal cash flows using interest rates over periods of time.

Uploaded by

Nahidul Islam IU
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 3

Time value of money means today’s money is more valuable than tomorrow’s money.

Present Value (PV) Future Value (FV)

Why money has time value?

1. Present consumption preferences

2. Inflation: Increase in the general price level

3. Risk and certainly

Cash flow: Flows of cash

Receiving cash =Cash Inflow

Paying cash = Cash Outflow

1. Single cash flow: FDR (Fixed Deposit Receipt) – Deposit 1, 00,000 taka at a time for 10

years.

Features: Single amount, single period of time.

2. Equal cash flow/Annuity: Installment, DPS (Deposit Pension Scheme) Deposit10,000

taka per year for 10 years.

Features: Equal amount, equal time interval

3. Mixed cash flow: Current account, Saving account

Feature: Several amounts, several times


PV =
FV
(1+i)n
= (1+.12)
100
5
100
= (1.12) =
5
100
1.7623 = 56.74 Ans

Where,

12% = 12/100 = .12

8% = 8/100 = .08

FV
PV =
(1+i)n

Or, FV = PV (1+i)n

1+.08 =1.08^5 =

Equal Cash flow / Annuity (A)

A = Amount invested / received at the end/beginning of each

year/month.

1.12^-10 =
1-Ans = Do/.12

You might also like

pFad - Phonifier reborn

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


Alternative Proxies:

Alternative Proxy

pFad Proxy

pFad v3 Proxy

pFad v4 Proxy