Time is money

Add that, which is like a big Tax Cut, to our other good Economic news.

Time is money

The current worth of a future sum of money or stream of cash flowsgiven a specified rate of return. Determining the Time is money discount rate is the key to valuing future cash flows properly, whether they be earnings or obligations. An annuity is a series of equal payments or receipts that occur at evenly spaced intervals.

Leases and rental payments are examples. The payments or receipts occur at the end of each period for an ordinary annuity while they occur at the beginning of each period for an annuity due. The value of an asset or cash at a specified date in the future, based on the value of that asset in the present.

The future value of a stream of payments annuityassuming the payments are invested at a given rate of interest. There are several basic equations that represent the equalities listed above. The solutions may be found using in most cases the formulas, a financial calculator or a spreadsheet.

In the case of the standard annuity formula, there is no closed-form algebraic solution for the interest rate although financial calculators and spreadsheet programs can readily determine solutions through rapid trial and error algorithms.

Time is money

These equations are frequently combined for particular uses. For example, bonds can be readily priced using these equations. A typical coupon bond is composed of two types of payments: The two formulas can be combined to determine the present value of the bond.

An important note is that the interest rate i is the interest rate for the relevant period. For an annuity that makes one payment per year, i will be the annual interest rate. For an income or payment stream with a different payment schedule, the interest rate must be converted into the relevant periodic interest rate.

For example, a monthly rate for a mortgage with monthly payments requires that the interest rate be divided by 12 see the example below. See compound interest for details on converting between different periodic interest rates.

The rate of return in the calculations can be either the variable solved for, or a predefined variable that measures a discount rate, interest, inflation, rate of return, cost of equity, cost of debt or any number of other analogous concepts. The choice of the appropriate rate is critical to the exercise, and the use of an incorrect discount rate will make the results meaningless.

For calculations involving annuities, you must decide whether the payments are made at the end of each period known as an ordinary annuityor at the beginning of each period known as an annuity due. If you are using a financial calculator or a spreadsheetyou can usually set it for either calculation.

The following formulas are for an ordinary annuity. The following formula use these common variables:The latest Tweets from TIME (@TIME).

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Tips to help you save time and money on shopping, home, health and fitness, tech and more. Time should be used in doing productive works. A person make use of his time by working hard to earn money. On the contrary, if the time is wasted, then it is equivalent to losing money.

How much is a work hour really worth? Studies show that employees spend about 31 hours per month in meetings, and spend less than 60 percent of time actually working productively.. Having gone to.

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