Non User
Index: > A B C D E F G H I J K L M N O P Q R S T U V W X Y Z	Business Non User Industries Finance Tax

Home > Present value

The simplest model of the time value of money is compound interest, which is in fact much simpler than simple interest. To someone who has the opportunity to invest an amount of money C for t years at a rate of interest of i compounded annually, the present value of the receipt of C, t years in the future, is C(1 + i)^−t. The expression (1 + i)^−t enters almost all calculations of present value. It represents the present value of 1. Many equations are expressed more concisely by making the substitution v = (1 + i)⁻¹. Something worth 1 at time = t (years in the future) is worth v^t at time = 0 (the present).

Present value is additive. The present value of a bundle of cash flows is the sum of each one's present value.

Many financial arrangements (including bonds, other loans, leases, salaries, membership dues, annuities, straight-line depreciationDepreciation is an estimate of the decrease in the value of an asset, caused by wear and tear or by obsolescence. The use of depreciation affects a company's (or an individual's) financial statements, and, in some countries, their taxes. Accounting A comp charges) stipulate structured payment schedules, which is to say payment of the same amount at regular time intervals. The term annuity is often used in to refer to any such arrangement when discussing calculation of present value, whether or not the arrangement is a retirementRetirement is the status of a worker who has stopped working. This usually happens upon reaching a determined age, when physical conditions don't allow the person to work any more (by illness or accident), or even for personal choice (usually in the prese plan. The expressions for the present value of such payments amount to summations of geometric series.

A periodic amount receivable indefinitely is called a perpetuityA perpetuity is an annuity in which the periodic payments begin on a fixed date and continue indefinitely. Fixed coupon payments on permanently invested (irredeemable) sums of money are prime examples of perpetuities. Scholarships paid perpetually from an and is of mostly theoretical interest. A perpetuity receivable starting at the present time is called a perpetuity due. If the frequency of payments equals the frequency of interest compounding, the present value of a perpetuity due with payments of 1, is given by d⁻¹, where d = 1 − (1 + i)⁻¹, and is called the rate of discount. In this case, i is the interest rate per period, not necessarily per year. If the first payment is 1 period in the future, the annuity is a perpetuity immediate, and the present value is i⁻¹.

A finiteIn mathematics, a set is called finite if and only if there is a bijection between the set and some set of the form {1, 2,. n with n isin N . It is a theorem that a set is finite if and only if there exists no bijection between the set and any of its prop number (n) of periodic payments, receivable at times 1 through n, is an annuity immediate. Again assuming payment size of 1, its present value differs from the present value of the corresponding perpetuity immediate by an amount that is the present value of all the payments numbered n + 1 and above. The latter has a value of i⁻¹ at time n, and vⁿi ^{− 1} at time 0. The present value of the annuity immediate is i⁻¹ − vⁿi⁻¹, or i⁻¹(1 − vⁿ). An annuity due receivable at times 0 through n − 1 has a present value of d⁻¹(1 − vⁿ).

This entire discussion thus far makes some enormous assumptions:

• That it is not necessary to account for price inflationFor alternative meanings see inflation (disambiguation). In economics, inflation is a fall in the market value or purchasing power of money. This is equivalent to a rise in the general level of prices. Inflation is the opposite of deflation. Zero or very.
• That it is not necessary to account for variable interest rates.
• That receipt of payments when due is certain.
• That we will live long enough to receive payments receivable by us in the future.

For these and many other reasons, we consider prediction of the future to be an inexact scienceFor the scientific journal named Science see Science (journal). Science is both a process of gaining knowledge, and the organized body of knowledge gained by this process. The scientific process is the systematic acquisition of new knowledge about a syste.

Politics	Business	Finance

Topics: Present Value Time Payments Interest Future Amount Minus...

---

Present valueThe present value of a future transaction is the nominal amount of money to change hands, adjusted to account for the time value of money. A given amount of money is almost always more valuable sooner than later, so present values are generally smaller th Presentation of a groupGroup theory In mathematics, one method of defining a group is by a presentation . One specifies a set S of generators so that every element of the group can be written as a product of some of these generators, and a set T of relations among those generat Presentation layerThe presentation layer is the sixth level of the seven layer OSI model. It responds to service requests from the application layer and issues service requests to the session layer. The presentation layer is responsible for the delivery and formatting of i Presentation ManagerPresentation Manager (PM) was the name given to the Graphical User Interface ( GUI) which IBM introduced in version 1. 10 of its operating system OS/2 in 1988. At the time, IBM and Microsoft were collaborating on subsequent version of OS/2; IBM was prepar Presentation programA presentation program is a computer software package used to give presentations, normally in the form of a " slide show". They typically include three major functions, the slide show system to display content in a linear fashion, an editor that allows te Present-day proponents of establishing cooperative relationships between humans and horsesMonty Roberts Perhaps the foremost and best-known advocate of the use of "horse language" as a training tool would be Monty Roberts, known the world over as a "horse whisperer" (although the book and movie by that name were not based on Roberts but on Joh Present Present tense Presentation copy Presentation (disambiguation) Presentation Presente litany Present (time) Present Laughter Presentation (Bible)