Problem 36E

How can the corrosion of iron be prevented?

Investment and Finance Literacy – Notes – week 3 TIME VALUE OF MONEY Future value: the equivalent dollar value of a given amount of money today, accounting for inflation, and the potential rate of interest you could get on that money o Future value (FV) = Present Value * (1 + i)^ n o Where “i” is the rate of interest, and n is the number of periods of accruing interest Present Value: the equivalent value in today’s dollars that can be placed on an amount of money you will receive in the future, considering how much interest you would have to receive. o Present Value (PV) = Future Value * 1/(1 + i)^ n Everything in finance ultimately comes down to the time value of money*** Compounding: where interest gained on an investment is added back to the amount of money being compounded o The longer time an investment is compounded, the more money you will gain; compounding is greater the greater the interest rate is; can be used to calculated the future value of investments o The shorter a given compounding period is, ergo, the more often you get paid interest, the greater the total amount of interest paid over a given time is. (aka. The same initial amount of money gaining interest over a one year period will be greater if you compound interest every month, as opposed to every year.) Discounting: the opposite of compounding, it is the amount you have to reduce a fut