Accounting and the Time Value of Money Chapter 6 Basic Time Value Concept The time value of money is the relationship between time and money. According to the present value of money concept, a dollar today is worth more than a dollar in the future.
The appropriate interest rate depends on:
The higher the credit risk, the higher the interest rate.
principal x interest rate (%) x time
Typically one of two types:
i = interest rate per period
n = the number of periods
What is the future value of this single sum?
What is the present value of this single sum?
An annuity requires that:
Annuities may be broadly classified as:
Valuation of Long-term Bonds: