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Time Value of Money (TVM): Value of the money does not remain same it perishes over a span
of time of it its value go down over a period of time there are various factor one of the major
factor is inflation to compensate inflation and risk interest is given on the lending. So when we
take financial decisions like investment etc. we need to keep in mind the present value of the
inflow of the investment if that money will recovered after certain period of time or if it is series
of the inflow over a certain period of time then present value of all such inflows and also we
need to know what will be the future value of the money after certain period of time or if it is
series of inflow then future value of all such money at end of certain period.
The formula to know the present value of the annuities is PV=P((1-(1+r)^(-n))/r) where P is the
annuity, r is the discount rate and n is the number of period in the same manner formula to know
the future value of the annuity is FV =P *( {(((1+R)^N) - 1) / R}, where ) where P is the annuity,
r is the Interest rate and n is the number of period
Solution
Time Value of Money (TVM): Value of the money does not remain same it perishes over a span
of time of it its value go down over a period of time there are various factor one of the major
factor is inflation to compensate inflation and risk interest is given on the lending. So when we
take financial decisions like investment etc. we need to keep in mind the present value of the
inflow of the investment if that money will recovered after certain period of time or if it is series
of the inflow over a certain period of time then present value of all such inflows and also we
need to know what will be the future value of the money after certain period of time or if it is
series of inflow then future value of all such money at end of certain period.
The formula to know the present value of the annuities is PV=P((1-(1+r)^(-n))/r) where P is the
annuity, r is the discount rate and n is the number of period in the same manner formula to know
the future value of the annuity is FV =P *( {(((1+R)^N) - 1) / R}, where ) where P is the annuity,
r is the Interest rate and n is the number of period

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Time Value of Money (TVM) Value of the money does not remain same i.pdf

  • 1. Time Value of Money (TVM): Value of the money does not remain same it perishes over a span of time of it its value go down over a period of time there are various factor one of the major factor is inflation to compensate inflation and risk interest is given on the lending. So when we take financial decisions like investment etc. we need to keep in mind the present value of the inflow of the investment if that money will recovered after certain period of time or if it is series of the inflow over a certain period of time then present value of all such inflows and also we need to know what will be the future value of the money after certain period of time or if it is series of inflow then future value of all such money at end of certain period. The formula to know the present value of the annuities is PV=P((1-(1+r)^(-n))/r) where P is the annuity, r is the discount rate and n is the number of period in the same manner formula to know the future value of the annuity is FV =P *( {(((1+R)^N) - 1) / R}, where ) where P is the annuity, r is the Interest rate and n is the number of period Solution Time Value of Money (TVM): Value of the money does not remain same it perishes over a span of time of it its value go down over a period of time there are various factor one of the major factor is inflation to compensate inflation and risk interest is given on the lending. So when we take financial decisions like investment etc. we need to keep in mind the present value of the inflow of the investment if that money will recovered after certain period of time or if it is series of the inflow over a certain period of time then present value of all such inflows and also we need to know what will be the future value of the money after certain period of time or if it is series of inflow then future value of all such money at end of certain period. The formula to know the present value of the annuities is PV=P((1-(1+r)^(-n))/r) where P is the annuity, r is the discount rate and n is the number of period in the same manner formula to know the future value of the annuity is FV =P *( {(((1+R)^N) - 1) / R}, where ) where P is the annuity, r is the Interest rate and n is the number of period