Chapter 5 (Future value, present value, r and t)
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7 Terms
1
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“Time Value of Money”
$1 in hand today is worth more than $1 in the future
OR
Money today is worth more than the same money in the future because you could invest it and earn interest (opportunity cost)
2
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Future Value
Value in the future of some amount of money with accumulated interest
3
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Present Value
The value of some future amount of money today
4
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For a given interest rate, the longer the time period
the higher the future value
5
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For a given interest rate, the longer the time period,
the lower the present value
6
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For a given time period, the higher the interest rate,
the higher the future value
7
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For a given time period, the higher the interest rate,
the lower the present value
Note 
Flashcards (62)