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Time Value of Money

Time Value of Money

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Time Value of Money

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  1. Time Value of Money

  2. Future Value of Money • The value of an investment after it has been compounded with interest for a specific period of time • FV = principle (1 + interest) years • FV of $5,000 in 5 years if interest is %5? • FV = 5,000 (1.05)5 • FV = 5,000 (1.34) • FV = $6,700

  3. Present Value of Money • The current value of an investment after it has been discounted • PV = Principle ( 1_____) • ( 1 + interest)years • PV of $10,000 if interest is %4 and time is 4 years • PV = 10,000 (_____1____) • (1 + .04 )4 • PV = 10,000 (.8219) = 8,219