For example how much would i have to deposit today

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Unformatted text preview: ould I have to deposit today into an account paying 7 percent annual interest in order to accumulate $3,000 at the end of 5 years? Present value is the current dollar value of a future amount—the amount of money that would have to be invested today at a given interest rate over a specified period to equal the future amount. Present value depends largely on the investment opportunities and the point in time at which the amount is to be received. This section explores the present value of a single amount. The Concept of Present Value discounting cash flows The process of finding present values; the inverse of compounding interest. The process of finding present values is often referred to as discounting cash flows. It is concerned with answering the following question: “If I can earn i percent on my money, what is the most I would be willing to pay now for an opportunity to receive FVn dollars n periods from today?” This process is actually the inverse of compounding interest. Instead of findi...
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This document was uploaded on 03/03/2014 for the course MBA BMMF at Open University Malaysia.

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