Quantitative Methods  What Is The Time Value Of Money?
The principle of time value of money  the notion that a given sum of money is more valuable the sooner it is received, due to its capacity to earn interest  is the foundation for numerous applications in investment finance.
Central to the time value principle is the concept of interest rates. A borrower who receives money today for consumption must pay back the principal plus an interest rate that compensates the lender. Interest rates are set in the marketplace and allow for equivalent relationships to be determined by forces of supply and demand. In other words, in an environment where the marketdetermined rate is 10%, we would say that borrowing (or lending) $1,000 today is equivalent to paying back (or receiving) $1,100 a year from now. Here it is stated another way: enough borrowers are out there who demand $1,000 today and are willing to pay back $1,100 in a year, and enough investors are out there willing to supply $1,000 now and who will require $1,100 in a year, so that market equivalence on rates is reached.
Exam Tips and Tricks The CFA exam question authors frequently test knowledge of FV, PV and annuity cash flow streams within questions on mortgage loans or planning for college tuition or retirement savings. Problems with uneven cash flows will eliminate the use of the annuity factor formula, and require that the present value of each cash flow be calculated individually, and the resulting values added together. 

Professionals
Time Value Of Money Calculations
CFA Level 1  Time Value Of Money  Calculations 
Professionals
Time Value Of Money Applications
CFA Level 1  Time Value Of Money  Applications Of Calculations 
Economics
Forces Behind Interest Rates
Get a deeper understanding of the importance of interest rates and what makes them change. 
Fundamental Analysis
Calculating the Present Value of an Annuity
The present value of an annuity is the current, lump sum value of periodic future payments as calculated using a specific rate. 
Professionals
Annuities And The Future Value And Present Value Of Multiple Cash Flows
Learn about annuities and how their present and future values are calculated. 
Investing Basics
How to Calculate the Value of Annuities
Here's everything you need to account for when calculating the present and future value of annuities. 
Forex Education
Time Value Of Money: Determining Your Future Worth
Determining monthly contributions to college funds, retirement plans or savings is easy with this calculation. 
Investing Basics
What are Cash Equivalents?
Cash equivalents are money market instruments. 
Professionals
Bond Valuation Basics
CFA Level 1  Bond Valuation Basics. Learn the three basic steps behind bond valuation. Covers the fundamental principles of discounting a security's expected cash flows. 
Options & Futures
StockPicking Strategies: Fundamental Analysis
Ever hear someone say that a company has "strong fundamentals"? The phrase is so overused that it's become somewhat of a cliché. Any analyst can refer to a company's fundamentals without ...

Present Value Of An Annuity
The current value of a set of cash flows in the future, given ... 
Present Value  PV
The current worth of a future sum of money or stream of cash ... 
Future Value Of An Annuity
The value of a group of payments at a specified date in the future. ... 
100% Mortgage
A mortgage loan in which the borrower receives a loan amount ... 
Annuity
A financial product that pays out a fixed stream of payments ... 
Time Value of Money  TVM
The idea that money available at the present time is worth more ...

What exact information is included in the interest rate when calculating the present ...
Find out what the interest rate of an annuity means in the context of the present value calculation, including an explanation ... Read Answer >> 
How do I calculate the future value of an annuity?
Find out how to calculate the future value of an ordinary annuity or an annuity due, including how the power of compounding ... Read Answer >> 
What is the difference between the present value of an annuity and the future value ...
Find out about the difference between the future value and present value of a fixed annuity, including how to use these calculations ... Read Answer >> 
How does money supply affect interest rates?
Read about the link between the supply of money and market interest rates, and find out why money supply alone can't explain ... Read Answer >> 
For what types of financial instruments would I want to calculate the present value ...
Learn about the types of financial instruments the present value of an annuity calculation is most useful for, including ... Read Answer >> 
Why is the time value of money (TVM) an important concept to investors?
Understand why the time value of money is an important concept for investors. Learn when present value and future value calculations ... Read Answer >>