Short note about time value of money.

1. TIME VALUE OF MONEYTIME VALUE OF MONEY

2. TIME VALUE OFTIME VALUE OF
MONEYMONEY
 The idea that money availableThe idea that money available
at the present time is worthat the present time is worth
more than the same amount inmore than the same amount in
the future due to its potentialthe future due to its potential
earning capacity. This coreearning capacity. This core
principle of finance holds that,principle of finance holds that,
provided money can earnprovided money can earn
interest, any amount of moneyinterest, any amount of money
is worth more the sooner it isis worth more the sooner it is
received.received.

3. FUTURE VALUEFUTURE VALUE
 The amount to which a cashThe amount to which a cash
flow or series of cash flow willflow or series of cash flow will
grow over a given period of timegrow over a given period of time
when compounded at a givenwhen compounded at a given
interest rate.interest rate.

4. PRESENT VALUEPRESENT VALUE
 The value today-that is, currentThe value today-that is, current
value-of a future cash flow orvalue-of a future cash flow or
series of cash flow.series of cash flow.

5. FUTURE VALUEFUTURE VALUE
OF AN ANNUITYOF AN ANNUITY
 A series of payment of an equalA series of payment of an equal
amount at fixed, equal intervalsamount at fixed, equal intervals
for a specified number offor a specified number of
periods.periods.

6. ORDINARYORDINARY
ANNUITYANNUITY
An annuity whose paymentsAn annuity whose payments
occur at the end of each period.occur at the end of each period.

7. ANNUITY DUEANNUITY DUE
 An annuity whose paymentsAn annuity whose payments
occur at the beginning of eachoccur at the beginning of each
period.period.

8. PERPETUITIESPERPETUITIES
 A stream of equal paymentsA stream of equal payments
expected to continue forever.expected to continue forever.

9. AMORTIZED LOANAMORTIZED LOAN
A loan that requires equalA loan that requires equal
payments over its life; thepayments over its life; the
payments include both interestpayments include both interest
and repayment of the debt.and repayment of the debt.

10. AMORTIZED LOANAMORTIZED LOAN
A loan that requires equalA loan that requires equal
payments over its life; thepayments over its life; the
payments include both interestpayments include both interest
and repayment of the debt.and repayment of the debt.