Time Value of Money — Why a Rupee Today Is Worth More Than Tomorrow

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Overview

The time value of money is the foundation of all finance. Money available now is worth more than the same amount later because it can be invested to earn returns.

The Formula

Future Value = PV × (1+r)ⁿ | Present Value = FV ÷ (1+r)ⁿ

Standard formula used by professionals worldwide

Worked Example

Step-by-step

10,000 today at 8% for 5 years = 14,693 future value | OR: 14,693 in 5 years = 10,000 present value

Key Points

Accuracy: Results are as accurate as your inputs
Units: Always use consistent units throughout
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Frequently Asked Questions

What is net present value (NPV)?

Sum of present values of all future cash flows minus initial investment. Positive NPV = good investment.

What discount rate should I use?

Your required rate of return or cost of capital. Use 8-10% for personal decisions.

How does TVM explain loan pricing?

Lenders discount your future repayments to calculate the present value. This equals the loan amount at your rate.

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