The Time Value of Money

The time value of money is the idea that an amount of money received earlier is worth more than that same amount of money received later. In other words, a dollar received today is worth more than a dollar received tomorrow. Money received earlier is worth more because the sooner you have money, the sooner you can invest that money, and the longer your investment has to grow in value.

Future value of money (FV) = Present value of money (PV) x [ 1 + [Interest rate(i) divided by # of compounding periods per year (n)] (# of compounding periods per year times (x) the number of years (t)

FV = PV x [1+(i/n)] (n X t)