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NAME: - RISHI KALE

ROLL NO. ² 27

TYBBA,

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Today¶s rupee is not equal to tomorrow¶s rupee.

why today¶s rupee is not equal to that of 

tomorrow?

This is due to the following three factors:

Inflation

Risk Opportunity

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` Postponing the use of a rupee means postponing 

consumption.

` Since money has a time value means we must tak e 

this time value of money into consideration when we ar e mak ing financial decisions.

` Ther e ar e four f undamental time value of money 

calculations.

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` Futur e Value of a Rupee calculation (FV)

` Pr esent Value of a Rupee calculation (PV)

` Futur e Value of an Annuity (FV of Annuity)

` Pr esent Value of an Annuity (PV of Annuity)

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` Financial decisions at Firm Level:

` (a) Investment Decisions

` (b) Financing Decisions

` Financial Decisions at Individual level:

` (a) Saving Deployment

`

(b) Borr owing

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oAs most financial decisions affect the cash f lows over a

long per iod of time, the explicit r ecognition of the timevalue of  money becomes impor tant for rational and

optimal decisions.

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` Compound inter est is always assumed in Time Value 

of Money pr oblems.

` In Time Value of Money applications, payments must 

r epr esent all outf lows (negative amount) or allinf lows (positive amount).

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` Single Amount

` Annuity

` Since money has time value, the pr esent value of a

pr omised f utur e amount is wor th less the longer you

have to wait to r eceive it.

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` Single Amount

` Annuity

` Since money has time value, we naturally expect the f utur e value to be gr eater than the pr esent value.

` The differ ence between the two depends on the 

number of compounding per iods involved and the 

going inter est rate.

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` Time Value of Money is an impor tant concept in 

financial management. It can be used to compar e 

investment alter natives and to solve pr oblems 

involving loans, mor tgages, leases, savings, and annuities.

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` Pear son Education Limited 2004, Fundamentals of  Financial

Management, 12/e, Cr eated by: Gr egor y A. Kuhlemeyer , 

Ph.D., Carr oll College, Wauk esha, WI

` Notes on Financial Management BY MAHESH K. MADAN

` Jour nal of  College Teaching & Lear ning Volume 1, Number 7

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` The Time Value of Money: AClar ifying and 

Simplifying Appr oach Norman D. Gar dner , Utah 

Valley State College

` http://www.getobjects.com/Components/Finance/

TVM/concepts.html

` http://wik i.answer s.com/Q/FAQ/1786-10` http://www.9-Zone.or g/Finance/Home.html

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` http://in.answer s.yahoo.com/question/nextQuestion;_ylt=AvDsU8UQBQurSbNFHUZynAuHHwx.;_ylv=3?qid=20080421125630AAqcR gQ&cid=396545322&state=r esolved

` http://cbdd.wdu.edu/k ewlcontant/cdoutput/TOm505/Ar ticle.html

` http://www.buzzle.com/author s.asp?author =3299