How Interest Rates Work Time Value of Money Present Value and Future Value
Would you rather have $1.00 today, or $1.00 in a year? What about $1.05 in a year? What about $2.00 in a year?
In this video, I start with a conceptual description of how Time Value of Money works. The preference to have a little money today, or more money in the future. I describe how that concept gives rise to interest rates.
Next, I show how to compute return, based on interest rates, using a calculator.
Finally, I show how to perform complex interest rate computations, like Net Present Value, Present Value, Future Value, and Payments, using handy functions in Microsoft Excel.
These computations are the foundation not only for investing, but for selecting among competing projects for the project that will generate the best return.
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