# Time value of money

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The **Time value of money** is based on the premise that an investor prefers to receive a payment of a fixed amount of money today, rather than an equal amount in the future, all else being equal.

All of the standard calculations are based on the most basic formula, the present value of a future sum, "discounted" to a present value. For example, a sum of *FV* to be received in one year is discounted (at the appropriate rate of *r*) to give a sum of *PV* at present.

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