Submitted by jbloss on March 5, 2008

• Category: Business
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Time Value Of Money

Time Value of Money
People need to receive a return on today’s money (present value) to reach desired financial goals (future value). Further, people desire to borrow money at a lower cost than can be earned with that money. Here are a few examples of applications of principals of the time value of money.
Compound Interest
At such time as interest is paid on a present value (PV), the balance increases to a future value (FV). The next interest payments are now based on the new balance that includes previous interest payments, and so on. This is compound interest and is represented by the formula:
FV = PV * ( 1 + i )n
Where “i” is the interest rate and...

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