Business Finance- time value of money

12 terms by maxfjord

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Intrinsic value

Has worth independent of any benefit it may provide to humans

Time value of money

the principle that a dollar received today is worth more than a dollar received in the future

Future value

What an amount invested today at a particular interest rate will be worth in the future

Simple interest

interest paid on the principal alone , I=prt

Compound interest

interest earned on both the principal amount and any interest already earned

Discounting

The act of finding the present value of future cash flows.

Discount rate

the rate used to calculate the present value of future cash flows

Discount rate formula

FV = PV x 1/(1+i)

Cash outflow

a negative value

Cash inflow

a positive value

Rule 72

Approximation of how long it will take to double a sum at a given interest rate. (72/annual compound interest rate)

TDM

Time needed to double your money
See rule 72

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