Money, like space, exists
in time. There is a difference between $1 today and
$1 one year from now. This fundamental insight, sometimes
easy to overlook, affects how we make present money-based
decisions. It should also guide legal decision-makers.
This section looks at the symmetric relationship between
present and future value, as well as how each can be
computed from the other.
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1.1.1
- Present value and future value
Time value of money affects our most basic financial
decisions. Your bank pays you for the time you keep
your money deposited in your savings account. You pay
your student loan company for the time you use its money
to finance your education. (More
1.1.1>>)
1.1.2 - Computing present
and future values
It used to be that computing present and future values
involved mind-numbing calculations using imprecise financial
tables. Today calculators and computer spreadsheets
significantly simplify the human task by turning the
many calculations over to silicon chips. Quick and accurate
present value computing has revolutionized our financial
world. (More 1.1.2>>)
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Chapter 1 - Time value of money
