FIN 301
Lecture 3

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Time Value of Money (Chapter 3)
Time Value of Money (TVM):
Time value of money
refers to the fact that a dollar today is worth more
than a dollar promised at some time in the future.
The
trade-off
of money now and money later
depends on the
potential rate of return
the money
may generate
Rate of return:
Discount rate
Cost of capital
Opportunity cost of capital
Required return
Future value (FV):
The amount an investment
or asset is worth after one or more period.

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