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Reading 6 The Time Value of Money Introduction time value of money as a topic in investment mathematics deals with equivalence relationships between cash flows with different dates. Mastery of time value of money concepts and techniques is essential for investment analysts.
<span>The reading1 is organized as follows: Section 2 introduces some terminology used throughout the reading and supplies some economic intuition for the variables we will discuss. Section 3 tackles the problem of determining the worth at a future point in time of an amount invested today. Section 4 addresses the future worth of a series of cash flows. These two sections provide the tools for calculating the equivalent value at a future date of a single cash flow or series of cash flows. Sections 5 and 6 discuss the equivalent value today of a single future cash flow and a series of future cash flows, respectively. In Section 7, we explore how to determine other quantities of interest in time value of money problems.
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