- Glossary
- Time Value of Money

**What is time value of money?**

Time value of money is an important concept used in finance to understand the relationship between time and money. It states that a rupee today will have more value than a rupee tomorrow due to inflation and other factors. Economic decisions are heavily influenced by this principle as it helps us better understand investments and future financial goals.

**How to calculate time value of money?**

To calculate the time value of money, you need to know the following information:

- The present value of the money: This is the current value of the money that you have.
- The future value of the money: This is the value that the money is expected to have at a future point in time.
- The interest rate: This is the rate at which the money is expected to earn interest over the period of time.
- The length of time: This is the amount of time that the money is expected to be invested for.

**Time value money formula**

The formula for calculating the time value of money is:

Future Value = Present Value x (1 + Interest Rate)^Time

For example, if you have INR 1,000 today, and you expect it to earn an interest rate of 5% per year for a period of 5 years, the future value of the money would be calculated as follows:

Future Value = 1,000 x (1 + 0.05)^5

Future Value = 1,276.28

Therefore, the future value of the money would be INR 1,276.28.

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