Time value of money
This query is : Resolved
21 September 2013
i am not able to understand the concept of time value of money .. pls help????
21 September 2013
Dear Anjali.
Just trying to make u understand on a basic level:
lets say you have Rs 100 in you pocket today and you out it in a bank FD at 10% annual interest. So from a year from now, you shall receive Rs 110.
So we can say that future value of Rs 100 is Rs 110. And another way to put is present value of Rs 110 is Rs 100.
In practice what we do is we discount the future value @ interest to arrive at the present value. In nut shell it is equivalent of principal amount.
Just trying to make u understand on a basic level:
lets say you have Rs 100 in you pocket today and you out it in a bank FD at 10% annual interest. So from a year from now, you shall receive Rs 110.
So we can say that future value of Rs 100 is Rs 110. And another way to put is present value of Rs 110 is Rs 100.
In practice what we do is we discount the future value @ interest to arrive at the present value. In nut shell it is equivalent of principal amount.
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