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Difference between present value and future value of money

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We all know that a dollar today is worth more than a dollar tomorrow. This is because, in a situation of rising prices, the purchasing power of a dollar decreases as time passes. We need to know how much a dollar that we are going to receive in the future is actually worth today. This is known as present value of money.

Question 1: What is the difference between present value and future value of money. Explain compounding and discounting of interest with suitable examples.

Reference no: EM132448563

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