low interest rates available on saving accounts

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low interest rates available on saving accounts


the reson that money today is worth more than the same amount of money in the future is because of the money capacity to earn more money .simply deposit money today into a bank account and it will earn more money for as long as it remain there.this concept is calledthe time value of money for example you want to sell your car for rupees 5,000,00 a potential buyer offer you rupees 1,000,00 today plus rupees 130000 a year for the next four year should you accept the offer? give your ans in comment? we can only compare differt value of the money at single point in time .$80 in 1885 can not be directly comparedto $50 in 2020. we need to move those monies to the same point in time. we are going to thinking about moving money through time we will need two concept PRESENT VALUE (PV) which refer to a monetary value today and FUTURE VALUE(FV) , which refer to a monetary value at a specific time in the future. a present value (pv) calculation allow you to compare a future sum of money with a sum in todays dollars (euros, pound,etc.) you can also compare series of cash payment ,ofen refer to as cash flows. remember the earlier problem about sellingf your car you would need to calculate the present value of those combined payments.a present value calculation therefore moves money backward in time form the future to today.convesely a future value(fv) calculation values an amount of money ,or series of cash flows at some specific time in the future .in this cash flow at some specific in the future money is moving forwad in time.


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