1. Quantitative Methods2. Measuring Portfolio Returns3. Analyzing Your Client's Financial Profile4. Special Issues for Retirement Plans5. Portfolio Risks

The time value of money calculations can also be used to calculate the net present value of a series of cash flows, or of an investment plus a series of cash flows. Basically, the net present value calculation compares the value of a dollar today with the value of that dollar in the future, after taking rate of return and/or inflation into account. When evaluating an investment, it is desirable for the net present value to be greater than the amount invested; otherwise, there is no incentive to make that investment.

 Exam Tips and TricksA typical time value of money question will look something like this:

1. If \$10,000 is invested at 6%, compounded monthly, it would be worth \$18,194 in 10 years. \$18,194 would be the investment's _____________.
1. Internal rate of return
2. Present value
3. Expected return
4. Future value

The correct answer is "d" - the ending value is known as the future value.

Rates of Return

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