Connect With Us
Register
Login
Time value of money definition
Time value of money is the principle that a sum of money is worth more today than the same sum in the future. The reason is that money in hand can be invested or earn interest before the later date arrives.
Time value of money links present value and future value. Present value shows what a future sum is worth in today's terms; future value shows what today's sum grows into after it earns a return over a set period and rate.
Present value and future value are the two sides of the same calculation. Future value compounds a known amount forward at a given rate to find what it becomes later. Present value discounts a known future amount back to find what it is worth now. One moves money forward in time; the other moves it back.
Time value of money Example
You hold USD 1,000 today and can earn 5% interest for one year. You work out the future value:
future value = present value √ó (1 + interest rate)
USD 1,000 √ó 1.05 = USD 1,050
Your USD 1,000 today is worth USD 1,050 in one year if it earns a 5% return.
The information provided on this website is of a general nature only and does not constitute personal financial advice. Before acting on any information on this website, you should consider the suitability of the information in relation to your objectives, financial situation and needs. Investing in CFDs and FX Margin Contracts carries significant risks and is not suitable for all investors. You may lose more than your initial deposit. You do not own, or have, any interest in the underlying asset. We recommend that you seek independent advice and ensure you fully understand the risks involved before trading. It is important that you read and consider the disclosure document before you acquire any product listed on the website. The information and advertisements offered on this website are not intended for use by any person in any country or jurisdiction where such use would be contrary to local laws and regulations. The Products and Services offered on this website are not intended for residents of the United States, Malaysia and Thailand.
TMGM is authorized and regulated in various jurisdictions.
Trademax Australia Limited, trading as TMGM, is regulated by the Australian Securities and Investments Commission (ASIC), AFSL no. 436416 and is located at Level 28, One International Tower, 100 Barangaroo Avenue, 2000 Sydney, NSW Australia.
Email: support@tmgm.com.au
Trademax Global Limited, trading as TMGM, is authorized and regulated by the Vanuatu Financial Services Commission (VFSC), registration number 40356 and registered at 1276, Kumul Highway, Port Vila, Vanuatu, Republic of Vanuatu.
Email: support@tmgm.com
Trademax Global Markets (SE) Limited, trading as TMGM, is authorized and regulated by the Financial Services Authority (FSA) of Seychelles, with license number SD224. The company is registered at Office No 13, Providence Estate ABIS Centre, Mahe, Seychelles.
Email: support@tmgm.com
Trademax Global Markets (International) Pty Ltd, trading as TMGM, is authorized and regulated by the Financial Services Commission, Mauritius (FSC) with license no. GB22201012, and registered at 33, Edith Cavell Street C/o IQ EQ Fund Services (Mauritius) Ltd Port Louis, 11324 Mauritius.
Email: support@tmgm.com
Copyright © TMGM. All rights reserved