Master the Time Value of Money formula. Present value, future value, annuity, and perpetuity calculations explained with examples. Essential for CFA Level 1.
The current worth of a future cash flow discounted at the appropriate rate. Foundation of all valuation.
The value of a current amount after earning interest over a specified period.
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Future Value
Where: r = interest rate per period, n = number of periods
Present Value
Where: r = discount rate, n = periods
Free covers one Quants module. Premium opens all 10 subjects and 59 modules of CFA Level 1.
Future Value
Single lump sum compounding
Present Value
Discounting future cash flows
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Use when:
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Free covers one Quants module. Premium opens all 10 subjects and 59 modules of CFA Level 1.
What is the present value of $10,000 to be received in 5 years at a discount rate of 8%?
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