![]() ![]() ![]() The time value of money is the idea that the same amount of money is worth more today than in the future due to inflation and other factors.įor example, $100 today has more purchasing power today than it would be in 10 years. To use the time value of money formula, we need a few given variables, the principal, interest rate, years to grow and the number of compounding periods per year.įor example, to find out how much $20,000 can grow in 8 years with a 5% interest rate and annual compounding, we would plugin the variables to the TVM formula as below N = number of compounding periods per year With compound interest and regular deposits.įollowing is the time value of money formula on how to calculate TVM. Many people doesn't realize how much their money can grow ![]() TVM formula has option for different compound periods and additional monthly or yearly contribution. ![]()
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