Time Value of Money

DayBeginning ValueEnding Value 1$0.01$ $ $ $ $ $ $ $ $ $5.12$ $10.24$ $20.48$ $41.00$ $82.00$ $164.00$ $328.00$ $655.00$1, $1,311.00$2, $2,621.00$5, $5,243.00$10, $10,486.00$20, $20,972.00$41, $41,943.00$83, $83,886.00$167, $167,772.00$335, $335,544.00$671, $671,089.00$1,342, $1,342,177.00$2,684, $2,684,356.00$5,368, $5,368,711.00$10,737,422.00

Future Value of Money The value of an investment after it has been compounded with interest for a specific period of time Compound Interest is a very powerful tool in making your money work for you.

Ways to figure the future value of money Future value formula Future Value = P ( 1+ I ) n Where P=principle I=interest n=years Future value Table Multiply principle times factor in table Factor based on years and interest

FV of $5,000 in 5 years if interest is 5%? Formula method FV = Principle(1 +interest)years FV = 5,000 (1.05) 5 FV = 5,000 (1.34) FV = $6,400

Future Value of $5000 in 5 years if interest is 5% Table method FV = Principle X Value from table FV = $5000 X 1.28 = $6400

FUTURE VALUE TABLE INTEREST YEAR4%5%6%7%8%9%10%11%12%15%

Present Value of Money  The current value of an investment after it has been discounted  PV = Principle ( 1_____) ( 1 + interest) years PV of $2,000 if interest is 8% and time is 5 years PV = 2,000 (_____1____) (1 +.08)5