Future and Present value

5 important questions on Future and Present value

What is the time-value-of-money concept?

Time has an impact on the value of money. The value of a euro today, differs from a value of a euro in the future

What are the 2 types of interest?

1. Simple interest - interest on deposit, but interest is not put in savings account and therefore you will not get interest over your interest
2. Compound interest - received interest is put on your savings account, so you receive interest over your interest as well

What is a perpetuity?

A constant cash flow with an endless life time
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What is a consol?

A government bond issued by the UK government

What is a growing perpetuity?

Similar to a normal perpetuity, but the received cash flows increase annually at a certain time

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