1) Time value of money is based on the belief that a dollar that will be received at some future date is worth more than a dollar today.
2) Future value is regarded as the value of a future amount at the present time, calculated by the compounded interest.
3) Money accumulates when it is invested and earns interest, because of the time value of money.
4) The present value of an annuity can be obtained by discounting the individual cash flows of an annuity and totalling them.
5) To convert the table from ordinary annuity to annuity due is to multiple the annuity payment by (1+ i).
6) Ten percent compounded quarterly with 10 years’ investment means 40 compounding periods.
7) Ten percent compounded quarterly means 5 percent per compounding period.
8) PVA = PMT × PVIFA
9) FVA = PMT × FVIFA
10) The shorter the time period, the lower the future value interest factor, other things being equal.