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How Inflation rate make a value for money

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Time Value of Money
Time Value of Money (TVM) Formulas
These formulas are used in the CedarSpring TVM software component. They are useful for
complex TVM problems that involve present and future value amounts and also a series of equal
payments. The payments can be made at the beginning or end of each period, and the
compounding periods per year do not have to equal the payments per year. You may want to check
the TVM Concepts section to see if the simpler formulas and detailed examples found there will
better meet your needs.
NOTE: The formulas on this page use the cash flow model where amounts paid out are
negative and amounts received are positive. The Payment example should make this clearer.
Payment
Definition.
Where:
PMT = Payment
PV = Present Value
FV = Future Value
ip = Interest Rate per period
N = Number of periods
k = 1 if payment is made at the end of the period; 1 + ip if made at the beginning of the
period
Example: You are 65 years old and have saved $400,000 for retirement. You believe you will live
20 more years. You want to leave $100,000 to your family. You can invest at a nominal annual
rate of 6% compounded monthly. What amount can you withdraw at the end of each month and
still reach all your goals?
PV = -400,000 (negative amount paid out (deposited))
FV = 100,000 (positive amount withdrawn after 20 years)
N = 240 (20 years x 12 months per year)
ip = .005 (.06/12 annual rate / 12 months per year)
k = 1 (payment at end of each month)
PMT = ? (positive amount withdrawn monthly)
PMT = [-400000 + ((-400000 + 100000) / (1.005
240
- 1]))] * -.005
PMT = [-400000 + (-300000 / (3.3102 -1))] * -.005

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PMT = [-400000 + -129858.8887] * -.005
PMT = 2,649.29
You can work through the example again with an online calculator that uses this formula.
Future Value
Definition.
This formula combines future value of a single amount and future value of an annuity.
Where:
FV = Future Value
PMT = Payment
ip = Interest Rate per period
N = Number of periods
PV = Present Value
k = 1 if payment is made at the end of the period; 1 + ip if made at the beginning of the
period
Present Value
Definition.
This formula combines present value of a single amount and present value of an annuity.
Where:
PV = Present Value
PMT = Payment
k = 1 if payment is made at the end of the period; 1 + ip if made at the beginning of the
period
FV = Future Value
ip = Interest Rate per period
N = Number of periods

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Time Value of Money Time Value of Money (TVM) Formulas These formulas are used in the CedarSpring TVM software component. They are useful for complex TVM problems that involve present and future value amounts and also a series of equal payments. The payments can be made at the beginning or end of each period, and the compounding periods per year do not have to equal the payments per year. You may want to check the TVM Concepts section to see if the simpler formulas and detailed examples found there will better meet your needs. NOTE:  The formulas on this page use the cash flow model where amounts paid out are negative and amounts received are positive. The Payment example should make this clearer.     Payment Definition. Where: PMT = Payment PV = Present Value FV = Future Value ip = Interest Rate per period N = Number of periods k = 1 if payment is made at the end of the period; 1 + ip if made at the beginning of the period Example: You are 65 years old and have saved $400,000 for retirement. You believe you will live 20 more years. You want to leave $100,000 to your family. You can invest at a nominal annual rate of 6% compounded monthly. What amount can you w ...
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