A financial notion known as "time value of money" acknowledges that money accessible today is worth more than the same amount in the future. According to this idea,a dollar received today is worth more than a dollar received in the future since money can be invested to produce returns.

Inflation, risk, and the possibility for investment returns are some of the elements that affect the temporal worth of money.

The following are some essential ideas about the temporal worth of money:

1. Present value (PV) :

Present value (PV) is the current value of  future monetary amount that has been discounted to reflect the time value of money. It is the current market value of a potential cash flow.

2. Future Value (FV) :

Taking into account the effects of compounding, future value is the value of an investment or monetaryamount at a given point in the future.

3. Interest Rate (Or Discount Rate) :

The interest rate, commonly referred to as the discount rate, is the rate of return used to determine whether money is worth more now or in the future. It displays the potential cost of making different financial decisions.

4. Compound Interest :

The process of generating interest on both the initial investment (principal) and the accumulated interest from earlier periods is known as compound interest. Investments might expand dramatically overtime thanks to it.

5. Annuties :

An annuity is a fixed sum of money that is received regularly over a predetermined length of time. They fall into one of two categories:

Conventional annuities, which are paid at the end of each period, or annuities due, which are paid at the start of each period.

6. Net present value (NPV) :

A financial metric known as net present value (NPV) is used to evaluate the profitability of an investment  or project. It computes the predicted cash flows' present value and subtracts the cost of the initial investment. An investment that is lucrative will have a positive NPV.

For a variety of financial decisios, including investment analysis, budgeting,loan payback planning, and assessing the profitability of company operations,it is essential to understand the time value of money. People and corporations can make better financial and investment decisions by taking the time value of money into account.