The document discusses the time value of money and various time value of money concepts. It begins by outlining key concepts like future value, present value, compounding and discounting. It then provides examples and formulas for calculating future and present value of single amounts and annuities. These include factors like interest rate, compounding periods, time horizon. The document also discusses related concepts like loan amortization, effective interest rates and annual percentage yield.
This is the third presentation for the University of New England Graduate School of Business unit GSB711 - Managerial Finance. It explores the time value of money, using examples to help students clarify this concept.
What is the 'Time Value of Money - TVM'
The time value of money (TVM) is the idea that money available at the present time is worth more than the same amount in the future due to its potential earning capacity. This core principle of finance holds that, provided money can earn interest, any amount of money is worth more the sooner it is received. TVM is also referred to as present discounted value.
BREAKING DOWN 'Time Value of Money - TVM'
Money deposited in a savings account earns a certain interest rate. Rational investors prefer to receive money today rather than the same amount of money in the future because of money's potential to grow in value over a given period of time. Money earning an interest rate is said to be compounding in value.
BREAKING DOWN 'Compound Interest'
Compound Interest Formula
Compound interest is calculated by multiplying the principal amount by one plus the annual interest rate raised to the number of compound periods minus one.The total initial amount of the loan is then subtracted from the resulting value.
In this PowerPoint, You will calculate annual percentage rate (APR) and Effective Interest Rate (EAR) in MS Excel. You find the example and solution as well.
TVM, Future Value Interest Factor (FVIF), Present Value Interest Factor (PVIF), present value interest factor of an annuity (PVIFA)
Using estimated rates of return, you can compare the value of the annuity payments to the lump sum.
The present value interest factor may only be calculated if the annuity payments are for a predetermined amount spanning a predetermined range of time.
Time Value of Money Formula
FV = PV x [ 1 + (i / n) ] (n x t)
Formula for Future Value Interest factor:
FVIF = (1+r)n
Formula for PVIF
PVIF = 1 / (1 + r)n
time value of money
,
concept of time value of money
,
significance of time value of money
,
present value vs future value
,
solve for the present value
,
simple vs compound interest rate
,
nominal vs effective annual interest rates
,
future value of a lump sum
,
solve for the future value
,
present value of a lump sum
,
types of annuity
,
future value of an annuity
This is the third presentation for the University of New England Graduate School of Business unit GSB711 - Managerial Finance. It explores the time value of money, using examples to help students clarify this concept.
What is the 'Time Value of Money - TVM'
The time value of money (TVM) is the idea that money available at the present time is worth more than the same amount in the future due to its potential earning capacity. This core principle of finance holds that, provided money can earn interest, any amount of money is worth more the sooner it is received. TVM is also referred to as present discounted value.
BREAKING DOWN 'Time Value of Money - TVM'
Money deposited in a savings account earns a certain interest rate. Rational investors prefer to receive money today rather than the same amount of money in the future because of money's potential to grow in value over a given period of time. Money earning an interest rate is said to be compounding in value.
BREAKING DOWN 'Compound Interest'
Compound Interest Formula
Compound interest is calculated by multiplying the principal amount by one plus the annual interest rate raised to the number of compound periods minus one.The total initial amount of the loan is then subtracted from the resulting value.
In this PowerPoint, You will calculate annual percentage rate (APR) and Effective Interest Rate (EAR) in MS Excel. You find the example and solution as well.
TVM, Future Value Interest Factor (FVIF), Present Value Interest Factor (PVIF), present value interest factor of an annuity (PVIFA)
Using estimated rates of return, you can compare the value of the annuity payments to the lump sum.
The present value interest factor may only be calculated if the annuity payments are for a predetermined amount spanning a predetermined range of time.
Time Value of Money Formula
FV = PV x [ 1 + (i / n) ] (n x t)
Formula for Future Value Interest factor:
FVIF = (1+r)n
Formula for PVIF
PVIF = 1 / (1 + r)n
time value of money
,
concept of time value of money
,
significance of time value of money
,
present value vs future value
,
solve for the present value
,
simple vs compound interest rate
,
nominal vs effective annual interest rates
,
future value of a lump sum
,
solve for the future value
,
present value of a lump sum
,
types of annuity
,
future value of an annuity
Important Calculations In Personal FinanceManish Chauhan
this presentation will teach some basic formula's every person should know for his personal finance needs . So that he can calculate some basic things himself .
how to sell pi coins effectively (from 50 - 100k pi)DOT TECH
Anywhere in the world, including Africa, America, and Europe, you can sell Pi Network Coins online and receive cash through online payment options.
Pi has not yet been launched on any exchange because we are currently using the confined Mainnet. The planned launch date for Pi is June 28, 2026.
Reselling to investors who want to hold until the mainnet launch in 2026 is currently the sole way to sell.
Consequently, right now. All you need to do is select the right pi network provider.
Who is a pi merchant?
An individual who buys coins from miners on the pi network and resells them to investors hoping to hang onto them until the mainnet is launched is known as a pi merchant.
debuts.
I'll provide you the Telegram username
@Pi_vendor_247
Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
Latino Buying Power - May 2024 Presentation for Latino CaucusDanay Escanaverino
Unlock the potential of Latino Buying Power with this in-depth SlideShare presentation. Explore how the Latino consumer market is transforming the American economy, driven by their significant buying power, entrepreneurial contributions, and growing influence across various sectors.
**Key Sections Covered:**
1. **Economic Impact:** Understand the profound economic impact of Latino consumers on the U.S. economy. Discover how their increasing purchasing power is fueling growth in key industries and contributing to national economic prosperity.
2. **Buying Power:** Dive into detailed analyses of Latino buying power, including its growth trends, key drivers, and projections for the future. Learn how this influential group’s spending habits are shaping market dynamics and creating opportunities for businesses.
3. **Entrepreneurial Contributions:** Explore the entrepreneurial spirit within the Latino community. Examine how Latino-owned businesses are thriving and contributing to job creation, innovation, and economic diversification.
4. **Workforce Statistics:** Gain insights into the role of Latino workers in the American labor market. Review statistics on employment rates, occupational distribution, and the economic contributions of Latino professionals across various industries.
5. **Media Consumption:** Understand the media consumption habits of Latino audiences. Discover their preferences for digital platforms, television, radio, and social media. Learn how these consumption patterns are influencing advertising strategies and media content.
6. **Education:** Examine the educational achievements and challenges within the Latino community. Review statistics on enrollment, graduation rates, and fields of study. Understand the implications of education on economic mobility and workforce readiness.
7. **Home Ownership:** Explore trends in Latino home ownership. Understand the factors driving home buying decisions, the challenges faced by Latino homeowners, and the impact of home ownership on community stability and economic growth.
This SlideShare provides valuable insights for marketers, business owners, policymakers, and anyone interested in the economic influence of the Latino community. By understanding the various facets of Latino buying power, you can effectively engage with this dynamic and growing market segment.
Equip yourself with the knowledge to leverage Latino buying power, tap into their entrepreneurial spirit, and connect with their unique cultural and consumer preferences. Drive your business success by embracing the economic potential of Latino consumers.
**Keywords:** Latino buying power, economic impact, entrepreneurial contributions, workforce statistics, media consumption, education, home ownership, Latino market, Hispanic buying power, Latino purchasing power.
Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
how to sell pi coins in all Africa Countries.DOT TECH
Yes. You can sell your pi network for other cryptocurrencies like Bitcoin, usdt , Ethereum and other currencies And this is done easily with the help from a pi merchant.
What is a pi merchant ?
Since pi is not launched yet in any exchange. The only way you can sell right now is through merchants.
A verified Pi merchant is someone who buys pi network coins from miners and resell them to investors looking forward to hold massive quantities of pi coins before mainnet launch in 2026.
I will leave the telegram contact of my personal pi merchant to trade with.
@Pi_vendor_247
Introduction to Indian Financial System ()Avanish Goel
The financial system of a country is an important tool for economic development of the country, as it helps in creation of wealth by linking savings with investments.
It facilitates the flow of funds form the households (savers) to business firms (investors) to aid in wealth creation and development of both the parties
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how to swap pi coins to foreign currency withdrawable.DOT TECH
As of my last update, Pi is still in the testing phase and is not tradable on any exchanges.
However, Pi Network has announced plans to launch its Testnet and Mainnet in the future, which may include listing Pi on exchanges.
The current method for selling pi coins involves exchanging them with a pi vendor who purchases pi coins for investment reasons.
If you want to sell your pi coins, reach out to a pi vendor and sell them to anyone looking to sell pi coins from any country around the globe.
Below is the contact information for my personal pi vendor.
Telegram: @Pi_vendor_247
What price will pi network be listed on exchangesDOT TECH
The rate at which pi will be listed is practically unknown. But due to speculations surrounding it the predicted rate is tends to be from 30$ — 50$.
So if you are interested in selling your pi network coins at a high rate tho. Or you can't wait till the mainnet launch in 2026. You can easily trade your pi coins with a merchant.
A merchant is someone who buys pi coins from miners and resell them to Investors looking forward to hold massive quantities till mainnet launch.
I will leave the telegram contact of my personal pi vendor to trade with.
@Pi_vendor_247
what is the future of Pi Network currency.DOT TECH
The future of the Pi cryptocurrency is uncertain, and its success will depend on several factors. Pi is a relatively new cryptocurrency that aims to be user-friendly and accessible to a wide audience. Here are a few key considerations for its future:
Message: @Pi_vendor_247 on telegram if u want to sell PI COINS.
1. Mainnet Launch: As of my last knowledge update in January 2022, Pi was still in the testnet phase. Its success will depend on a successful transition to a mainnet, where actual transactions can take place.
2. User Adoption: Pi's success will be closely tied to user adoption. The more users who join the network and actively participate, the stronger the ecosystem can become.
3. Utility and Use Cases: For a cryptocurrency to thrive, it must offer utility and practical use cases. The Pi team has talked about various applications, including peer-to-peer transactions, smart contracts, and more. The development and implementation of these features will be essential.
4. Regulatory Environment: The regulatory environment for cryptocurrencies is evolving globally. How Pi navigates and complies with regulations in various jurisdictions will significantly impact its future.
5. Technology Development: The Pi network must continue to develop and improve its technology, security, and scalability to compete with established cryptocurrencies.
6. Community Engagement: The Pi community plays a critical role in its future. Engaged users can help build trust and grow the network.
7. Monetization and Sustainability: The Pi team's monetization strategy, such as fees, partnerships, or other revenue sources, will affect its long-term sustainability.
It's essential to approach Pi or any new cryptocurrency with caution and conduct due diligence. Cryptocurrency investments involve risks, and potential rewards can be uncertain. The success and future of Pi will depend on the collective efforts of its team, community, and the broader cryptocurrency market dynamics. It's advisable to stay updated on Pi's development and follow any updates from the official Pi Network website or announcements from the team.
The European Unemployment Puzzle: implications from population agingGRAPE
We study the link between the evolving age structure of the working population and unemployment. We build a large new Keynesian OLG model with a realistic age structure, labor market frictions, sticky prices, and aggregate shocks. Once calibrated to the European economy, we quantify the extent to which demographic changes over the last three decades have contributed to the decline of the unemployment rate. Our findings yield important implications for the future evolution of unemployment given the anticipated further aging of the working population in Europe. We also quantify the implications for optimal monetary policy: lowering inflation volatility becomes less costly in terms of GDP and unemployment volatility, which hints that optimal monetary policy may be more hawkish in an aging society. Finally, our results also propose a partial reversal of the European-US unemployment puzzle due to the fact that the share of young workers is expected to remain robust in the US.
Empowering the Unbanked: The Vital Role of NBFCs in Promoting Financial Inclu...Vighnesh Shashtri
In India, financial inclusion remains a critical challenge, with a significant portion of the population still unbanked. Non-Banking Financial Companies (NBFCs) have emerged as key players in bridging this gap by providing financial services to those often overlooked by traditional banking institutions. This article delves into how NBFCs are fostering financial inclusion and empowering the unbanked.
2. OUTLINE
• Why Time Value
• Future Value of a Single Amount
• Future Value of an Annuity
• Present Value of a Single Amount
• Present Value of an Annuity
• Intra-year Compounding and Discounting
3. WHY TIME VALUE
A rupee today is more valuable than a rupee a year hence. Why ?
• Preference for current consumption over future
consumption
• Productivity of capital
• Inflation
Many financial problems involve cash flows occurring at different
points of time. For evaluating such cash flows, an explicit consideration
of time value of money is required (Tools of compounding &
discounting are important which are very useful in finance – from
valuing securities to analyzing projects, determining lease rentals,
choosing the right financing instruments, setting up loan amortization
schedule, valuing companies etc.)
4. TIME LINE
Part A
0 1 2 3 4 5
12% 12% 12% 12% 12%
10,000 10,000 10,000 10,000 10,000
Part B
0 1 2 3 4 5
12% 12% 12% 12% 12%
10,000 10,000 10,000 10,000 10,000
5. FUTURE VALUE OF A SINGLE AMOUNT (Compounding)
Rs.
First year: Principal at the beginning 1,000
Interest for the year
(Rs.1,000 x 0.10) 100
Principal at the end 1,100
Second year: Principal at the beginning 1,100
Interest for the year
(Rs.1,100 x 0.10) 110
Principal at the end 1,210
Third year: Principal at the beginning 1,210
Interest for the year
(Rs.1,210 x 0.10) 121
Principal at the end 1,331
FORMULA
FUTURE VALUE = PRESENT VALUE (1+r)n
6. VALUE OF FVIFr,n FOR VARIOUS
COMBINATIONS OF r AND n
n/r 6 % 8 % 10 % 12 % 14 %
2 1.124 1.166 1.210 1.254 1.300
4 1.262 1.361 1.464 1.574 1.689
6 1.419 1.587 1.772 1.974 2.195
8 1.594 1.851 2.144 2.476 2.853
10 1.791 2.518 2.594 3.106 3.707
12 2.012 2.518 3.138 3.896 4.817
7. FUTURE VALUE OF A SINGLE AMOUNT (Power of Compounding)
7
- Suppose you deposit Rs 1000 today in a bank which pays 10 percent interest compounded
annually. How much will the deposit grow to after 8 years and 12 years.
- Compound and simple interest-
- Simple Interest-
Future value = PV[1+No. of years X interest rate]
(An investment of Rs 1000 if, invested at 12 percent simple interest rate, will in 5 years time will
become how much?)
8. DOUBLING PERIOD (How long would it take to double the amount at a given rate of interest)
Thumb Rule : Rule of 72
Doubling Period = 72
Interest rate
Interest rate : 15 percent
Doubling period = 72 = 4.8 years
15
A more accurate thumb rule : Rule of 69
Doubling period = 0.35 + 69
Interest rate
Interest rate : 15 percent
Doubling period = 0.35 + 69 = 4.95 years
15
Interest rate : 10 percent doubling period = 7.25 years
8
10. PRESENT VALUE OF AN UNEVEN SERIES
A1 A2 An
PVn = + + …… +
(1 + r) (1 + r)2 (1 + r)n
n At
=
t =1 (1 + r)t
Year Cash Flow PVIF12%,n Present Value of
Rs. Individual Cash Flow
1 1,000 0.893 893
2 2,000 0.797 1,594
3 2,000 0.712 1,424
4 3,000 0.636 1,908
5 3,000 0.567 1,701
6 4,000 0.507 2,028
7 4,000 0.452 1,808
8 5,000 0.404 2,020
Present Value of the Cash Flow Stream 13,376
11. Future Value of an Annuity
11
Suppose X deposits Rs 1000 annually in a bank for 5 years and his deposits earn
a compound interest @ the rate of 10 percent. What will be the value of this
series of deposits (an annuity) at the end of 5 years? Assuming that each
deposit occurs at the end of the year.
12. FUTURE VALUE OF AN ANNUITY
An annuity is a series of periodic cash flows (payments and receipts ) of equal amounts (Ordinary or Deferred annuity & annuity due)
1 2 3 4 5
1,000 1,000 1,000 1,000 1,000
+
1,100
+
1,210
+
1,331
+
1,464
Rs.6,105
Future value of an annuity = A [(1+r)n-1]/r
13. WHAT LIES IN STORE FOR YOU
Suppose you have decided to deposit Rs.30,000 per year in your Public Provident Fund Account
for 30 years. What will be the accumulated amount in your Public Provident Fund Account at the
end of 30 years if the interest rate is 08 percent ?
The accumulated sum will be :
Rs.30,000 (FVIFA8%,30yrs)
= Rs.30,000 (1.08)30 - 1
.08
= Rs.30,000 [ 113.283]
= Rs.33,98,490
14. HOW MUCH SHOULD YOU SAVE ANNUALLY
You want to buy a house after 5 years when it is expected to cost Rs.2 million. How much should you save
annually if your savings earn a compound return of 12 percent ?
The future value interest factor for a 5 year annuity, given an interest rate of 12 percent, is :
(1+0.12)5 - 1
FVIFA n=5, r =12% = = 6.353
0.12
The annual savings should be :
Rs.2000,000 = Rs.3,14,812
6.353
15. ANNUAL DEPOSIT IN A SINKING FUND
Futura Limited has an obligation to redeem Rs.500 million bonds 6 years hence. How much should the
company deposit annually in a sinking fund account wherein it earns 14 percent interest to accumulate
Rs.500 million in 6 years time ?
The future value interest factor for a 5 year annuity, given an interest rate of 14 percent is :
FVIFAn=6, r=14% = (1+0.14)6 – 1 = 8.536
0.14
The annual sinking fund deposit should be :
Rs.500 million = Rs.58.575 million
8.536
16. FINDING THE INTEREST RATE
A finance company advertises that it will pay a lump sum of Rs.8,000 at the end of 6 years to investors who
deposit annually Rs.1,000 for 6 years. What interest rate is implicit in this offer?
The interest rate may be calculated in two steps :
1. Find the FVIFAr,6 for this contract as follows :
Rs.8,000 = Rs.1,000 x FVIFAr,6
FVIFAr,6 = Rs.8,000 = 8.000
Rs.1,000
2. Look at the FVIFAr,n table and read the row corresponding to 6 years
until you find a value close to 8.000. Doing so, we find that
FVIFA12%,6 is 8.115 . So, we conclude that the interest rate is slightly below 12 percent.
17. HOW LONG SHOULD YOU WAIT
You want to take up a trip to the USA which costs Rs.10,00,000 and the cost is expected to remain unchanged in nominal
terms. You can save annually Rs.50,000 to fulfill your desire. How long will you have to wait if, your savings earn an
interest of 12 percent? The future value of an annuity of Rs.50,000 that earns 12 percent is equated to Rs.1,000,000.
50,000 x FVIFAn=?,12% = 1,000,000
50,000 x 1.12n – 1 = 1,000,000
0.12
1.12n - 1 = 1,000,000 x 0.12 = 2.4
50,000
1.12n = 2.4 + 1 = 3.4
n log 1.12 = log 3.4
n x 0.0492 = 0.5315
n = 0.5315 = 10.8 years
0.0492
You will have to wait for about 11 years.
18. PRESENT VALUE OF AN ANNUITY
18
Suppose Ram expects to receive Rs 1000 annually for 3 years, each occurring at the end of
the year. What is the present value of this stream of benefits if, the discount rate is 10
percent?
19. PRESENT VALUE OF AN ANNUITY
1
(1+r)n
r
Value of PVIFAr,n for Various Combinations of r and n
n/r 6 % 8 % 10 % 12 % 14 %
2 1.833 1.783 1.737 1.690 1.647
4 3.465 3.312 3.170 3.037 2.914
6 4.917 4.623 4.355 4.111 3.889
8 6.210 5.747 5.335 4.968 4.639
10 7.360 6.710 6.145 5.650 5.216
12 8.384 7.536 6.814 6.194 5.660
1 -
Present value of an annuity = A
20. LOAN AMORTISATION SCHEDULE
Loan : 1,000,000 r = 15%,n = 5 years
1,000,000= A x PVAn =5, r =15%
= A x 3.3522
A = 298,312
Year Beginning Annual Interest Principal Remaining
Amount Instalment Repayment Balance
(1) (2) (3) (2)-(3) = (4) (1)-(4) = (5)
1 1,000,000 298,312 150,000 148,312 851,688
2 851,688 298,312 127,753 170,559 681,129
3 681,129 298,312 102,169 196,143 484,986
4 484,986 298,312 72,748 225,564 259,422
5 259,422 298,312 38,913 259,399 23*
a. Interest is calculated by multiplying the beginning loan balance by the interest rate.
b. Principal repayment is equal to annual instalment minus interest.
* Due to rounding off error a small balance is shown
21. EQUATED MONTHLY INSTALMENT
Loan = 1,000,000, Interest = 1% p.m., Repayment period = 180 months
A x [1-1/(1.01)180]
0.01
A = Rs.12,002
1,000,000 =
22. PRESENT VALUE OF A GROWING ANNUITY
A cash flow that grows at a constant rate for a specified period of time is a growing annuity. The time line of a
growing annuity is shown below:
A(1 + g) A(1 + g)2 A(1 + g)n
0 1 2 3 n
The present value of a growing annuity can be determined using the following formula :
(1 + g)n
(1 + r)n
PV of a Growing Annuity = A (1 + g)
r – g
The above formula can be used when the growth rate is less than the discount rate (g < r) as well as when the growth
rate is more than the discount rate (g > r). However, it does not work when the growth rate is equal to the discount rate
(g = r) – in this case, the present value is simply equal to n A.
1 –
23. PRESENT VALUE OF A GROWING ANNUITY
For example, suppose you have the right to harvest a teak plantation for the next 20 years over which you expect to get
100,000 cubic feet of teak per year. The current price per cubic foot of teak is Rs. 500, but it is expected to increase at a
rate of 8 percent per year. The discount rate is 15 percent. The present value of the teak that you can harvest from the
teak forest can be determined as follows:
1.0820
1 –
1.1520
PV of teak = Rs 500 x 100,000 (1.08)
0.15 – 0.08
= Rs.551,736,683
24. ANNUITY DUE
A A … A A
0 1 2 n – 1 n
A A A … A
0 1 2 n – 1 n
Thus,
Annuity due value = Ordinary annuity value (1 + r)
This applies to both present and future values
Ordinary
annuity
Annuity
due
26. SHORTER COMPOUNDING PERIOD
Future value = Present value 1+ r mxn
m
Where, r = nominal annual interest rate
m = number of times compounding is done in a
year
n = number of years over which compounding is
done
Example : Rs.5000, 12 percent, 4 times a year, 6 years
5000(1+ 0.12/4)4x6 = 5000 (1.03)24
= Rs.10,164
27. EFFECTIVE VERSUS NOMINAL RATE
r = (1+k/m)m –1
r = effective rate of interest
k = nominal rate of interest
m = frequency of compounding per year
Example : k = 8 percent, m=4
r = (1+.08/4)4 – 1 = 0.0824
= 8.24 percent
Nominal and Effective Rates of Interest
Effective Rate %
Nominal Annual Semi-annual Quarterly Monthly
Rate Compounding Compounding Compounding Compounding
8 8.00 8.16 8.24 8.30
12 12.00 12.36 12.55 12.68
28. EAR AND APR
• Effectiveannual rate (EAR)reflectsthe total amount of interestthat will be earned at the end of
the year.
• It is also referred to as the effectiveannual yield (EAY)or the annual percentage yield (APY).
• Annual percentage rate (APR) is the amount of simple interestearned without considering the
effect of intra- year compounding.