If the concern is for the value that existing money will have next year, the formula for the intertemporal value of money can be expressed as follows: Next Year's Value = Present Value (1 + r). For example, if the interest rate is 10% and the present value is $100, the $100 will increase to $110 at the end of a year. a. Using this algebraic expression, show the formula for the present value of future income and calculate what $200 received next year is worth now. b. What is the present value of $100 received 2 years from now?

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A: The cashback period refers to the time frame it takes to recover the cost of an asset or investment.

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Effective Interest Rate

The term interest rate can be defined as the amount that is charged by the lender as a percentage on the principal amount. Interest rate which is charged annually is known as annual percentage rate.