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  • Wow I Mean That's Good

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    The document discusses key concepts in finance related to measuring the time value of money, including present value, future value, and compounding. Present value refers to the amount of money needed today to equal a future amount, taking into account interest rates. Future value is the amount a sum of money today will be worth in the future with interest. Compounding means interest earns additional interest over time.

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    The document discusses key concepts in finance related to measuring the time value of money, including present value, future value, and compounding. Present value refers to the amount of money needed today to equal a future amount, taking into account interest rates. Future value is the amount a sum of money today will be worth in the future with interest. Compounding means interest earns additional interest over time.

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    © All Rights Reserved
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    7 views1 page

    Wow I Mean That's Good

    Uploaded by

    kral
    The document discusses key concepts in finance related to measuring the time value of money, including present value, future value, and compounding. Present value refers to the amount of money needed today to equal a future amount, taking into account interest rates. Future value is the amount a sum of money today will be worth in the future with interest. Compounding means interest earns additional interest over time.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    Finance the field that studies how people make decisions regarding the allocation of resources over time

    and the
    handling of risk

    Present Value: Measuring the Time Value of Money


    present value the amount of money today that would be needed, using prevailing interest rates, to produce a given
    future amount of money

    future value the amount of money in the future that an amount of money today will yield, given prevailing interest rates

    compounding the accumulation of a sum of money in, say, a bank account, where the interest earned remains in the
    account to earn additional interest in the future

    Quick Quiz The interest rate is 7 percent. What is the present value of $150 to be received in 10 years?

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