⏰Money received or paid at different times has different values
💲The time value of money can be used to calculate present and future values
💰The present value of $121 in 2 years is $100
🔮The future value of $100 in 1 year, with a 10% interest rate, is $110
🧮The present value of $65 in 1 year, with a 10% interest rate, is $59.09
What is the time value of money?
—The time value of money refers to the concept that money received or paid at different times has different values. It takes into account the impact of interest rates on the value of money over time.
How is the present value calculated?
—The present value is calculated by discounting future cash flows or amounts using an appropriate interest rate. It takes into account the time value of money and reflects the value of a future amount in terms of today's dollars.
What is the future value?
—The future value refers to the value of an amount of money at a future date, taking into account compound interest. It is calculated by applying the interest rate to the initial amount over a specific period of time.
What is the present value of $121 in 2 years?
—The present value of $121 in 2 years, with a 10% interest rate, is $100. This means that if you were to receive $121 in 2 years, its present value today would be $100.
What is the future value of $100 in 1 year with a 10% interest rate?
—The future value of $100 in 1 year, with a 10% interest rate, is $110. This means that if you were to invest $100 at a 10% interest rate for 1 year, it would grow to $110.
00:00The time value of money refers to the idea that money received or paid at different times has different values.
02:57The present value of $121 in 2 years, with a 10% interest rate, is $100.
03:38The future value of $100 in 1 year, with a 10% interest rate, is $110.
05:15The present value of $65 in 1 year, with a 10% interest rate, is $59.09.
