TeachMeFinance.com - explain present value
present value -- A single number that expresses a flow of current and future income
(or payments) in terms of an equivalent lump sum received (or paid) today. The calculation of present
value depends on the rate of interest. For example, if $100 is invested on January 1 at an annual interest rate of 5 percent, it will grow to $105 by January 1 of the next year. Hence, at an annual 5
percent interest rate , the present value of $105 payable a year from today is $100.
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