Week 8 CheckPoint-Time Value of Money

# Week 8 CheckPoint-Time Value of Money - Time Value of Money...

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Time Value of Money 1 Time Value of Money Melissa Krol FIN 200 October 27, 2010 Instructor: John G. Oladokun Axia College University of Phoenix

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Time Value of Money 2 Time Value of Money Future value is the measurement of the worth of funds that are permitted to grow at a specified rate over a period of time. The formula used is: n i PV FV ) 1 ( + = FV= future value, PV=present value, i=interest rate, and n=number of periods. One would use this formula if they needed to know what their savings account would be worth after a specified number of years at the current interest rate. For example, one puts \$1,000 in a savings account and wants to know how much the savings account will be worth after two years at a two percent interest rate. The use of the formula above would provide them with the answer. Present value is the current value of a future amount at a specified rate of return. The formula used is + = n i FV PV ) 1 ( 1 The formula above would be used to establish the current worth of a future amount. An
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Week 8 CheckPoint-Time Value of Money - Time Value of Money...

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