Time Value of Money : The value of the money changes with the change in time. If an individual deposits his savings in the bank then, the amount will increase at the specified interest rate. But if he invests that same amount in different avenues then he may get loss or more profit Present Value : Present Value is that value of money which measures the worth of a future amount in today’s value adjusted for interest and inflation. It is used in finance for the valuation of future value, stock and bond pricing . Future Value: Future value is that value of an investment which will have more worth in future if the amount is invested today at a simple or compounded rate. To identify: The value of borrowed money when it’s future value is given.

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Chapter 3, Problem 10P

Summary Introduction

Time Value of Money:

The value of the money changes with the change in time. If an individual deposits his savings in the bank then, the amount will increase at the specified interest rate. But if he invests that same amount in different avenues then he may get loss or more profit

Present Value:

Present Value is that value of money which measures the worth of a future amount in today’s value adjusted for interest and inflation. It is used in finance for the valuation of future value, stock and bond pricing.

Future Value:

Future value is that value of an investment which will have more worth in future if the amount is invested today at a simple or compounded rate.

To identify:

The value of borrowed money when it’s future value is given.

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