Meaning of Time Value of Money The term ‘Time Value of Money (TVM)’ implies that there is a connection between ‘time’ and ‘value of money’. This concept can be explained by a simple question - Would you prefer to receive $100 today or after a year? The answer shall always be obviously ‘today’. Let us understand why we prefer it today. If you receive $100 now, you can deposit it in a bank at say 10% interest rate, a
Time Value of Money is an important financial concept, and primarily refers to the value of money at different points of time. Two methods… Read Article The post Compounding vs Discounting – All You Need to Know appeared first on eFinanceManagement.
Annuity formula as a standalone term could be vague or ambiguous. It can be either ‘present value annuity formula‘ or ‘future value annuity formula‘. Before we learn how to use the annuity formula to calculate annuities, we need to be conversant with these terms. What is Annuity? It is a series of periodical payments or receipts of a fixed amount for a specified period. For example, a contract specifying $1500 of rent payable monthly for 5 years. This is an annuity paymen