Time Value of Money

Knowledge Center



Summary, forum, best practices, expert tips and information sources.

11 items • 12.826 visits


Summary

What is the Time Value of Money? Meaning.

The Time Value of Money is the fundamental financial concept that an amount of money in hand today is worth more than the same amount of money in the future. This is caused by the return that you could earn on investing the money or simply placing it in a bank account and receive interest.

Time allows one the opportunity to postpone consumption and earn interest. Not having the opportunity to earn interest on money is called Opportunity Cost.


There is also a risk factor included in the term, because $100 today is more certain than $100 in a year from now.


Examples of Time Value of Money

The Future Value of an amount PV in n years with interest rate r can be calculated as follows: FV = PV x (1 + r)n

Example. How much will 100 be worth in 2 years, presuming an interest rate of 4%?  FV = 100 x (1 + 0,04)2 = 108,16


The Present Value of an amount FV in n years from now with interest rate r can be calculated as follows: PV = FV x 1 / (1 + r)n

Example. How much is 100 in 2 years worth now, presuming an interest rate of 4%?  PV = 100 x 1 / (1 + 0,04)2 = 95,20


Special Interest Group

Join

Time Value of Money Special Interest Group.



Special Interest Group (33 members)

Forum

New Topic

Forum about the Time Value of Money.


Time Needed to Double your Money
How long does it take approximately to double $9,000 at a compound rate of 8% per year? (...)
3
 
2 comments
🔥 NEW Valuing Stocks Using Dividends: The Dividend Discount Model
The value of a stock in its simplest sense is the present value of the cash flow expected to be provided by that stock ( (...)
2
 

Start a new forum topic about the Time Value of Money. More info.

 

Best Practices

Sign up

The top-rated topics about the Time Value of Money. Here you will find the most valuable ideas and practical suggestions.


Expert Tips

Sign up

Advanced insights about the Time Value of Money. Here you will find professional advices by experts.


Information Sources

Sign up

Various sources of information regarding the Time Value of Money. Here you will find powerpoints, videos, news, etc. to use in your own lectures and workshops.



Research Links

Sign up

Automatically jump to further useful sources regarding the Time Value of Money.


News Videos Presentations Books More

News

Videos

Presentations

Books

More


Compare with: Net Present Value  |  Depreciation  |  Amortization  |  Rule of 72  |  Residual Value  |  Internal Rate of Return  |  Discounted Cash Flow  |  Time to Market

Special Interest Group

Do you have a keen interest in the Time Value of Money? Become our SIG Leader

 
 

Return to Management Hub: Decision-making & Valuation  |  Finance & Investing


More on Management  |  Return to Management Dictionary

 

This ends our Time Value of Money summary and forum.



About 12manage | Advertising | Link to us / Cite us | Privacy | Suggestions | Terms of Service
2021 12manage - The Executive Fast Track. V15.8 - Last updated: 31-7-2021. All names of their owners.