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How to develop a healthy relationship with money
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The impact of emotions on financial decisions
The formula for the present value of future payments
PV= FV / (1+i)n
Where:
PV=Present value
FV=Future value
i=Interest rate
n=Number of years.
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MORE IDEAS ON THIS
1. Present value
Calculating the present value of money answers the question;
If an investment promises to pay me a certain amount in future, how much is that sum worth today?
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102 reads
Factors To Consider In Your Decision
Choosing the investment with the highest interest rate (returns rate) is viable but this doesn’t work in all cases, because it might be difficult to estimate the return rates on all available options.
The length of time it takes for each investment to pay their respective returns should als...
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The Foundations of A Successful Investment
Investment in its most simple form means “using an asset you own to generate future profits” and assets don’t always mean money; sometimes it could be time, effort, or a property you own.
With this perspective, we can consider two school kids pledging porti...
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2. Future Value of money
This answers the questions:
I have a certain amount in hand today, how much is it worth in future?
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105 reads
What You Have Learnt
- The time value of money is vital in making business decisions
- The present value of money can be used to estimate what the profit of your investment is worth in today’s terms.
- Discount rates or interest rates can be determined by considering what return you’ll get from another...
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How Is This Applied?
The time value of money rule is:
"Money received today is worth more than that same amount received in future."
The time value of money is used to guide investment decisions. Before you invest, you want to know which of the options before you promises the highest prof...
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Interest rates
Interest rates used in the present value or future value formula can also be called discount rate. When considering an investment, it is appropriate to use the opportunity cost of putting your money elsewhere as your interest rate.
This is calculated as:
Opportunity Cost = FO−...
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CURATED FROM
CURATED BY
Writer, artist, Accountant and a forever learner. Learning, loving, Hoping.
These ideas explain the importance of time value considerations in making investment decisions.
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Future value
The value of a business today is the sum of all the money it will make in the future. Great businesses have the ability to generate significant cash flows in the future.
This explains why promising tech companies have such high valuations. Most of that value will come 10 to...
The “present-past-future” formula
This is a simple formula to construct your response.
- Start with a short overview of where you are now (which could include your current job along with a reference to a personal hobby or passion).
- Reference how you got to where you are (you could mention education,...
Create the future
The future is a time when the world looks fundamentally different from today.
We need two types of progress to create the future:
- Horizontal progress/Globalization (from 1 to n) - Copying things that work somewhere and making them available everywhere.
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