COMMERCE 2FA3 Chapter Notes - Chapter 2: Interest, W. M. Keck Observatory, Discount Window
5 May 2016
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Document Summary
One of the basic problems that financial managers financial is how to determine the value today of cash flows that are expected in the future. In the most general sense, the phrase time value of money refers to the fact that a dollar in hand today is worth more than a dollar promised at some time in the future. There is a trade-off between dollars today and dollars at some future time when investing money at a period of time. Future value (fv) refers to the amount of money to which an investment would grow over some length of time at some given interest rate. In general, if you invest for one period at an interest rate of r, your investment grows to (1+r) per dollar invested. Example: if you invest with an interest rate of 10% your investment grows to (1+0. 10)x100.
