compounding and discounting
- Created by: Shreeya Bhan
- Created on: 08-04-13 09:22
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- Time value of money
- DISCOUNTING - Pv: value at the beginning
- For a given interest rate (discount rate) – the longer the time period, the lower the present value
- For a given time period – the higher the interest rate (discount rate), the smaller the present value
- COMPOUNDING - FV: value at a later date
- Simple interest : r*t
- Compound interest - The extra comes from the interest earned on the first interest payment: (1+r)^t
- DISCOUNTING - Pv: value at the beginning
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