What is the different time value of the concepts of money?
There are many concepts that revolve around the time value of money, including the current value, future value, amortization and occasional costs. These concepts are extremely important in the analysis and management of investment opportunities. By using different time values of money concepts, a person can effectively compare different investment opportunities. The prerequisite for these concepts is to find out whether a number of payments are more valuable in the future than today's flat rate. When analyzing the income current, the calculation of the current value allows the person to determine the future payment today would be worth it. When calculating the current value, many factors must be taken into account, including the interest rate and the time before the future payment is completed.
In addition to calculating the current value of money, there are time values of the concepts of money are designed to calculate the future value of money. This concept is often used to determine the value of a number of payments in the future. In general, future values are counted on the investment that offers fixedInterest rates for a longer period of time.
Calculation of the internal return rate (IRR) Investment is another formula that is based on the time value of the concepts of money. This calculation is carried out for the purpose of determining the compound average annual return rate of a specific investment. Analysis of internal revenue rates can help investors determine whether some investment will bring revenues that are greater than the cost of capital used to carry out investments.
AMORTIZATION is another concept that is used to create payments for loan payments. These payments generally include interest and fundamental payments as a loan are gradually reduced. Payments that are amortized are generally related to the interest incurred from the loan and the rest is used on principle. Over time, most of the payment will be used on principle, with less interest payments.
the cost of an opportunity is also considered to be one of the end time valuesthe birds of the money. The prerequisite for this concept is that every investment opportunity must be measured against the performance of the lost opportunity to which the investor did not. The difference in the amount that was created by a missed opportunity compared to the opportunity on which it comes to is the cost of the opportunity.