Definition Valuation of financial instruments and project valuation techniques usually assume that expected cash flows are discounted at discrete intervals, e.g., daily, monthly, quarterly, semiannually, or annually. In some instances, however, especially for high-risk investments,… Read more

Definition Valuation of financial instruments and projects assumes that interest is usually compounded at discrete intervals, for example, annually, semiannually, quarterly, or monthly. In some cases, though, interest can be added continuously to calculate the… Read more

Definition The present value is a keystone in the time value of money concept because this technique is developed to evaluate any assets from financial instruments (e.g., stocks and bonds) with respect to the value… Read more

Definition The future value of uneven cash flows is the sum of future values of each cash flow. It can also be called “terminal value.” Unlike annuities where the amount of payment is constant, many… Read more

Definition The present value of an annuity (PVA) is the current worth of regular cash flows to be received at a specific date in the future based on the interest rate, which is also called… Read more

Definition In general terms, an annuity is a series of equal cash inflows or outflows made at fixed intervals. A series of coupon payments of a fixed-rate bond is an example of an annuity. So,… Read more

Definition The time value of money concept states that $1 today is worth more than $1 in the future. The reason is rather simple. If you have $1 today, you can invest it and receive… Read more

Definition The concept of time value of money is based on the idea that $1 now is worth more than $1 in the future. The basis of this idea is rather straightforward. If you have… Read more