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Ep. 16- The Time Value of Money
A dollar today is not the same as a dollar tomorrow. Even without external factors such as inflation, our money is worth more to us upfront, assuming we use it to invest wisely and enjoy watching the interest grow. Time Value of Money is an important financial concept. The concept is drawn from the idea that investors prefer money today rather than some in the future because of the potential of growth over time.
Special shoutout to listener Chapin S. for sending in the idea for this episode. We appreciate the support. I love feedback, comments, and questions and will be incorporating those into my future episodes. Please consider sharing this show with a friend or colleague. This community can grow and support one another. We all have unique investment strategies and experiences. Follow and contact me on Facebook, Twitter, Instagram, Email, and more: linktr.ee/FinanceFundamentalsPodcast
The show is written and edited by me, produced and edited by Daniel Ryoo. We work hard to ensure these episodes sound great for you. New episodes launch every week. Check back for Episode 17 on Thursday 5/20/21 to listen to my next interview. Check back for Episode 18 next Tuesday 5/25/21 to learn about credit cards. There is a lot to learn, but we work hard to discuss complex financial topics in an easily understood manner. Finance doesn't need to be pretentious, and you don't need to be an expert. Every little bit you can learn helps you save money and better understand where your money is going.
Take 20 minutes out of your week to listen to these podcasts, and you won't regret it! Please consider leaving a review on Apple Podcasts. It helps others find the show and see your thoughts.
See a time value of money calculator from MSN: https://www.msn.com/en-us/money/tools/timevalueofmoney
See show calculations below:
FV = PV x [ 1 + (i / n) ] (n x t)
Assume you invest $10,000 for one year at 10% interest. The future value of that money is:
FV = $10,000 x [1 + (10% / 1)] ^ (1 x 1) = $11,000
Let's rearrange the formula to find the value of that future sum in dollars today.
$5,000 one year from today, at 7% compounded interest is:
PV = $5,000 / [1 + (7% / 1)] ^ (1 x 1) = $4,673
Now check out the effects of compounding:
PV= FV/(1+r) where r is the interest rate.
Join Robinhood using my link (you'll help to support the show and get free stocks): https://join.robinhood.com/dustind195
Join WeBull using my link (you'll help to support the show and get free stocks): https://act.webull.com/pr/CVtvGRcJOCRb/wvw/inviteUS/
#loans #debt #studentloans #homebuying #mortgages #finance #fundamentals #financefund #money #investing #budgeting #personalfinance #crypto #bitcoin #stocks #funding #wealth #retirement #401k #RothIRA #IRA #growth #financialhealth #compounding #interest #insurance
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By Dustin Dubay
5
6868 ratings
A dollar today is not the same as a dollar tomorrow. Even without external factors such as inflation, our money is worth more to us upfront, assuming we use it to invest wisely and enjoy watching the interest grow. Time Value of Money is an important financial concept. The concept is drawn from the idea that investors prefer money today rather than some in the future because of the potential of growth over time.
Special shoutout to listener Chapin S. for sending in the idea for this episode. We appreciate the support. I love feedback, comments, and questions and will be incorporating those into my future episodes. Please consider sharing this show with a friend or colleague. This community can grow and support one another. We all have unique investment strategies and experiences. Follow and contact me on Facebook, Twitter, Instagram, Email, and more: linktr.ee/FinanceFundamentalsPodcast
The show is written and edited by me, produced and edited by Daniel Ryoo. We work hard to ensure these episodes sound great for you. New episodes launch every week. Check back for Episode 17 on Thursday 5/20/21 to listen to my next interview. Check back for Episode 18 next Tuesday 5/25/21 to learn about credit cards. There is a lot to learn, but we work hard to discuss complex financial topics in an easily understood manner. Finance doesn't need to be pretentious, and you don't need to be an expert. Every little bit you can learn helps you save money and better understand where your money is going.
Take 20 minutes out of your week to listen to these podcasts, and you won't regret it! Please consider leaving a review on Apple Podcasts. It helps others find the show and see your thoughts.
See a time value of money calculator from MSN: https://www.msn.com/en-us/money/tools/timevalueofmoney
See show calculations below:
FV = PV x [ 1 + (i / n) ] (n x t)
Assume you invest $10,000 for one year at 10% interest. The future value of that money is:
FV = $10,000 x [1 + (10% / 1)] ^ (1 x 1) = $11,000
Let's rearrange the formula to find the value of that future sum in dollars today.
$5,000 one year from today, at 7% compounded interest is:
PV = $5,000 / [1 + (7% / 1)] ^ (1 x 1) = $4,673
Now check out the effects of compounding:
PV= FV/(1+r) where r is the interest rate.
Join Robinhood using my link (you'll help to support the show and get free stocks): https://join.robinhood.com/dustind195
Join WeBull using my link (you'll help to support the show and get free stocks): https://act.webull.com/pr/CVtvGRcJOCRb/wvw/inviteUS/
#loans #debt #studentloans #homebuying #mortgages #finance #fundamentals #financefund #money #investing #budgeting #personalfinance #crypto #bitcoin #stocks #funding #wealth #retirement #401k #RothIRA #IRA #growth #financialhealth #compounding #interest #insurance