Time value of money 4.1 Flashcards
1
Q
What is interest rate
A
interest rates transform an amount of money at one point in time into money at another point in time.
2
Q
What is compounding?
A
process of moving a cash flow forward through time
3
Q
what is compound interest?
A
the idea that interest paid in one period starts to attract interest in all future periods.
4
Q
what is the compound formula
A
Future value= present value(1+rate)power t
5
Q
what is the discount formula
A
present value= Future value/(1+rate)power of t
6
Q
what is compounding m times formula
A
FV=PV(1+r/m)power mxt
