Syntax error Write the difference between present value and future value.

Write the difference between present value and future value.

The major differences between present value and future value are as follows −

Present value

  • Current value of cash flow in future.

  • Current value of an asset or an investment at starting of a particular time period.

  • Inflation is considered.

  • Discount rate and interest rate are considered.

  • Helps investors in decision making.

  • Discounted process/method is followed.

  • Present value = (cash flow)/ (1 + r)^n.

Future value

  • Value of future flow after certain future period.

  • Value of an asset or an investment at the end of a particular time period.

  • Inflation is not considered.

  • Only interest rates are considered.

  • Least considered by investors in making investment decisions.

  • Capitalization process/method is followed.

  • Future value = (present value) or (cash flow) (1 + r)^n.

Updated on: 2020-07-24T07:30:08+05:30

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