Time Value of Money – Present Value, Future Value

Time Value of Money – Present Value, Future Value

 Time Value of Money takes into account the present and future value of money when there is opportunity cost in the economy. Opportunity cost include the returns you would have gotten if you have invested the money somewhere else rather than keeping it under your bed. For instance, if I put $1000 into Bank A that offers me 10% return, how much would my money be if I do not take out the money and let it sit in the bank for 3 years?

I would get:
Year 1: $1000 * 110% = $1100
Year2:  $1100 * 110% = $1210
Year3:  $1210 * 110% = $1331

Alternatively, you can also work out the future sum by: $1000 * 1.1^3 ==> which translate to the formula: FV = PV * (1+i) ^n

Confident to give it a shot? Try the questions below. Lost? SMS 9758-7925 or email enquiry@starcresto.com for 
Financial Management Tuition, Business Finance tuition or Corporate Finance tuition =)