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TIME VALUE OF MONEY - Coggle Diagram
TIME VALUE OF MONEY
FUTURE VALUE
Future value of lump sum
- Future value determines the amount that a sum of money invested today will grow to in a given period of time
- The process of finding a future value is called “compounding” (hint: it gets larger)
- Using Formula FVn = PV (1+i)n
- Using Future Value Table FVn = PV (FVIF i%,n)
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ANNUITIES
An annuity is a cash flow stream in which the cash flows are all equal and occur at regular intervals.
Note that annuities can be a fixed amount, an amount that grows at a constant rate over time, or an amount that grows at various rates of growth over time.
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- A ringgit received today is worth more than a Ringgit received tomorrow
- Time value of money quantifies the value of a Ringgit through time