1. AP Economics Mr. Bernstein Module 24: The Time Value of Money February 25, 2015

2. AP Economics Mr. Bernstein The Time Value of Money Objectives - Understand each of the following: Why a dollar today is worth more than a dollar a year from now How the concept of present value can help you make decisions when costs or benefits come in the future 2

3. AP Economics Mr. Bernstein A dollar today is worth more than a dollar in the future Why? You could interest on the dollar held today, and still have it in the future Could spend it today and receive utility for a year Valid even if inflation is zero 3

4. AP Economics Mr. Bernstein Present Value and Future Value FV = PV * (1+r) t Or, PV = FV / (1+r) t Business make decisions based on Net Present Value 4