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1crore
now or
Rs.1 crore 10 years from now?
6%
Rs.2,000
FV
Future value of a single cash
flow
FV1 = PV (1+i)n
= 2,000 (1.06)2
= $2,247.20
!"
á! !#
FV = PV( FVF)
x
x
Where
A- Annuity
r-Time value of money/rate of
interest
n - umber of years
O The formula can be written as
x %x %
&
á'
O This concept is the exact opposite of
that of compounded value.
% | |"
|
||
|
|&
P(1+0.06)=1060
P=1060/1.06
=1000
PV=C1(PVF1)+C2(PVF2)+«««..Cn(PVFn
)
Jë
x
x x
Where A- Annuity
r - Time value of money
n - umber of years
OThe formula can be written as
x
x
O
These calculations demonstrate that
time literally is money - the value of the
money you have now is not the same as
it will be in the future and vice versa. o,
it is important to know how to calculate
the time value of money so that you can
distinguish between the worth of
investments that offer you returns at
different times.