Time Value of Money

Annuities and Time Value of MoneyThe purpose of this paper is give definitions of financial name related to annuities and time assess of money and how they ar related to investitures. Knowing the financial terms and how they relate to pecuniary values and the futures of those values is vital to the success of any investor. Having a deeper understanding of key financial terms related to behind finish create a optimum baseline for investors. stakes tramps and CompoundingInterest evaluate and compounding reside rates ar rates of values that argon applies to annuities or investings. The rate utilise to a detail monetary value will affix per year or quarterly based on the terms of the investment or loan and added to the main(prenominal). With regular interest rates, commonly in percentages, the count growings based on the principal without an increase per year or quarterly just on the intact measuring with a future value. With the use of compounding the intere st is added to the principal and the amount of interest is applied to the total and recalculated victimization the change magnitude principal. Finding the best opportunity for any investment is primary(prenominal) and knowing the difference in how interest rate are calculated can maximize profits or minimise cost.

Present Value and Future ValuePresent Value is defines as ?the amount that a future sum of money is expense straightaway given a specified rate of sink.? (Investopedia 2007) This can be restated as a way to measure the expect return on a capital investment. The present value directly is used by corp oration as nearly as individual in cases to! determine what something will be outlay in over time. Future value is a more(prenominal) definitive amount based on particular numbers. dupe the present amount invested multiplied by a precise annual interest will give a specific future value. There... If you want to get a undecomposed essay, monastic order it on our website: OrderCustomPaper.com

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