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Time Value Of Money
The time value of money refers to the fact that there is normally a greater benefit to receiving a sum of money now rather than an identical sum later. It may be seen as an implication of the later-developed concept of time preference. The time value of money refers to the observation that it is better to receive money sooner than later. Money you have today can be invested to earn a positive rate of return, producing more money tomorrow. Therefore, a dollar today is worth more than a dollar in the future. The time value of money is among the factors considered when weighing the opportunity costs of spending rather than saving or investing money. As such, it is among the reasons why interest is paid or earned: interest, whether it is on a bank deposit or debt, compensates the depositor or lender for the loss of their use of their money. Investors are willing to forgo spending their money now only if they expect a favorable net rate of return, return on their investment in the fut ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Required Rate Of Return
The discounted cash flow (DCF) analysis, in financial analysis, is a method used Valuation (finance), to value a security (finance), security, project, company, or financial asset, asset, that incorporates the time value of money. Discounted cash flow analysis is widely used in investment finance, real estate developer, real estate development, corporate financial management, and patent valuation. Used in industry as early as the 1700s or 1800s, it was widely discussed in financial economics in the 1960s, and U.S. courts began employing the concept in the 1980s and 1990s. Application In discount cash flow analysis, all future cash flows are estimated and Discounting, discounted by using cost of capital to give their present values (PVs). The sum of all future cash flows, both incoming and outgoing, is the net present value (NPV), which is taken as the value of the cash flows in question; see aside. For further context see ; and for the mechanics see valuation using discoun ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Economics Of Climate Change Chapter3 Discounting Curves
Economics () is a behavioral science that studies the production, distribution, and consumption of goods and services. Economics focuses on the behaviour and interactions of economic agents and how economies work. Microeconomics analyses what is viewed as basic elements within economies, including individual agents and markets, their interactions, and the outcomes of interactions. Individual agents may include, for example, households, firms, buyers, and sellers. Macroeconomics analyses economies as systems where production, distribution, consumption, savings, and investment expenditure interact; and the factors of production affecting them, such as: labour, capital, land, and enterprise, inflation, economic growth, and public policies that impact these elements. It also seeks to analyse and describe the global economy. Other broad distinctions within economics include those between positive economics, describing "what is", and normative economics, advocat ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Discounting
In finance, discounting is a mechanism in which a debtor obtains the right to delay payments to a creditor, for a defined period of time, in exchange for a charge or fee.See "Time Value", "Discount", "Discount Yield", "Compound Interest", "Efficient Market", "Market Value" and "Opportunity Cost" in Downes, J. and Goodman, J. E. ''Dictionary of Finance and Investment Terms'', Baron's Financial Guides, 2003. Essentially, the party that owes money in the present purchases the right to delay the payment until some future date.See "Discount", "Compound Interest", "Efficient Markets Hypothesis", "Efficient Resource Allocation", "Pareto-Optimality", "Price", "Price Mechanism" and "Efficient Market" in Black, John, ''Oxford Dictionary of Economics'', Oxford University Press, 2002. This Financial transaction, transaction is based on the fact that most people prefer current interest to delayed interest because of Mortality salience, mortality effects, impatience effects, and Motivational sa ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Future Value
Future value is the value of an asset at a specific date. It measures the nominal future sum of money that a given sum of money is "worth" at a specified time in the future assuming a certain interest rate, or more generally, rate of return; it is the present value multiplied by the accumulation function. Accessed: 2011-04-14. Archived by WebCite® ) The value does not include corrections for inflation or other factors that affect the true val ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Interest Rate
An interest rate is the amount of interest due per period, as a proportion of the amount lent, deposited, or borrowed (called the principal sum). The total interest on an amount lent or borrowed depends on the principal sum, the interest rate, the compounding frequency, and the length of time over which it is lent, deposited, or borrowed. The annual interest rate is the rate over a period of one year. Other interest rates apply over different periods, such as a month or a day, but they are usually annualized. The interest rate has been characterized as "an index of the preference . . . for a dollar of present ncomeover a dollar of future income". The borrower wants, or needs, to have money sooner, and is willing to pay a fee—the interest rate—for that privilege. Influencing factors Interest rates vary according to: * the government's directives to the central bank to accomplish the government's goals * the currency of the principal sum lent or borrowed * the term to m ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Compound Interest
Compound interest is interest accumulated from a principal sum and previously accumulated interest. It is the result of reinvesting or retaining interest that would otherwise be paid out, or of the accumulation of debts from a borrower. Compound interest is contrasted with Interest#Calculation, simple interest, where previously accumulated interest is not added to the principal amount of the current period. Compounded interest depends on the simple interest rate applied and the frequency at which the interest is compounded. Compounding frequency The ''compounding frequency'' is the number of times per given unit of time the accumulated interest is capitalized, on a regular basis. The frequency could be yearly, half-yearly, quarterly, monthly, weekly, daily, continuous compounding, continuously, or not at all until maturity. For example, monthly capitalization with interest expressed as an annual rate means that the compounding frequency is 12, with time periods measured in m ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Maturity (finance)
In finance, maturity or maturity date is the date on which the final payment is due on a loan or other financial instrument, such as a Bond (finance), bond or term deposit, at which point the Bond (finance)#Principal, principal (and all remaining interest) is due to be paid. Most instruments have a ''fixed maturity date'' which is a specific date on which the instrument matures. Such instruments include fixed interest and variable rate loans or debt instruments, however called, and other forms of security such as redeemable preference shares, provided their terms of issue specify a maturity date. It is similar in meaning to "redemption date". Some instruments have ''no fixed maturity date'' which continue indefinitely (unless repayment is agreed between the borrower and the lenders at some point) and may be known as "perpetual stocks". Some instruments have a range of possible maturity dates, and such stocks can usually be repaid at any time within that range, as chosen by the bor ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Return Of Capital
Return of capital (ROC) refers to principal payments back to "capital owners" (shareholders, partners, unitholders) that exceed the growth (net income/taxable income) of a business or investment. It should not be confused with Rate of Return (ROR), which measures a gain or loss on an investment. It is essentially a return of some or all of the initial investment, which reduces the basis on that investment. ROC effectively shrinks the firm's equity in the same way that all distributions do. It is a transfer of value from the company to the owner. In an efficient market, the stock's price will fall by an amount equal to the distribution. Most public companies pay out only a percentage of their income as dividends. In some industries it is common to pay ROC. *Real Estate Investment Trusts (REITs) commonly make distributions equal to the sum of their income and the depreciation (capital cost allowance) allowed for in the calculation of that income. The business has the cash to make t ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Bond (finance)
In finance, a bond is a type of Security (finance), security under which the issuer (debtor) owes the holder (creditor) a debt, and is obliged – depending on the terms – to provide cash flow to the creditor (e.g. repay the principal (i.e. amount borrowed) of the bond at the Maturity (finance), maturity date and interest (called the coupon (bond), coupon) over a specified amount of time.) The timing and the amount of cash flow provided varies, depending on the economic value that is emphasized upon, thus giving rise to different types of bonds. The interest is usually payable at fixed intervals: semiannual, annual, and less often at other periods. Thus, a bond is a form of loan or IOU. Bonds provide the borrower with external funds to finance long-term investments or, in the case of government bonds, to finance current expenditure. Bonds and Share capital, stocks are both Security (finance), securities, but the major difference between the two is that (capital) stockholders h ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Spreadsheet
A spreadsheet is a computer application for computation, organization, analysis and storage of data in tabular form. Spreadsheets were developed as computerized analogs of paper accounting worksheets. The program operates on data entered in cells of a table. Each cell may contain either numeric or text data, or the results of formulas that automatically calculate and display a value based on the contents of other cells. The term ''spreadsheet'' may also refer to one such electronic document. Spreadsheet users can adjust any stored value and observe the effects on calculated values. This makes the spreadsheet useful for "what-if" analysis since many cases can be rapidly investigated without manual recalculation. Modern spreadsheet software can have multiple interacting sheets and can display data either as text and numerals or in graphical form. Besides performing basic arithmetic and mathematical functions, modern spreadsheets provide built-in functions for common financial ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Future Value
Future value is the value of an asset at a specific date. It measures the nominal future sum of money that a given sum of money is "worth" at a specified time in the future assuming a certain interest rate, or more generally, rate of return; it is the present value multiplied by the accumulation function. Accessed: 2011-04-14. Archived by WebCite® ) The value does not include corrections for inflation or other factors that affect the true val ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Perpetuity
In finance, a perpetuity is an annuity that has no end, or a stream of cash payments that continues forever. There are few actual perpetuities in existence. For example, the United Kingdom (UK) government issued them in the past; these were known as consols and were all finally redeemed in 2015. Real estate and preferred stock are among some types of investments that effect the results of a perpetuity, and prices can be established using techniques for valuing a perpetuity. Perpetuities are but one of the time value of money methods for valuing financial assets. Perpetuities can be structured as a perpetual bond and are a form of ordinary annuities. The concept is closely linked to terminal value and terminal growth rate in valuation. Detailed description A perpetuity is an annuity in which the periodic payments begin on a fixed date and continue indefinitely. It is sometimes referred to as a perpetual annuity. Fixed coupon payments on permanently invested (irredeemable ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
