The amount of one, often referred to as the 'compound amount of one', is a financial metric used to determine the future value of a single sum of money invested at a particular interest rate over a specified period.
The amount of one per period refers to the compound amount that accumulates when one unit of currency is invested at the end of each period for a certain number of periods at a specific interest rate. This concept is critical in understanding the future value of annuities in finance.
A mathematical figure showing the present value of an income stream that generates one dollar of income each period for a specified number of periods.
The future value is the value that a sum of money will have in the future when invested at compound interest. If the future value is *F*, and the present value is *P*, at an annual interest rate *r*, compounded annually for *n* years, the formula is *F = P*(1 + r)^n. This concept is crucial for understanding the growth of investments over time.
Future Worth, also known as the Future Value (FV), refers to the amount of money that an investment made today will grow to at a specific point in the future when interest is compounded over time.
The Reversionary Factor is a mathematical factor that indicates the present worth of one dollar to be received in the future. It is equivalent to the Present Value of 1.
Terminal value (TV) is the estimated value of an investment at the end of a specified period, calculated using a given rate of interest. It represents the future worth of an initial investment assuming a specific growth rate.
The time value of money (TVM) concept, key to discounted cash flow calculations, posits that cash received earlier is worth more than the same amount received later due to the potential earning capacity of money. Conversely, future payments are valued less than payments made in the present.
