Inflation+and+the+Time+Value+of+Money

Inflation and the Time Value of Money-- Amy Stone and Abbie Tucker

=__**Inflation**__= >>>
 * Inflation is the rise in general price levels over time, usually measured as the percentage change of the Consumer Price Index (CPI)
 * Causes of Inflation:
 * Demand-pull Inflation: a type of inflation caused by an increase in demand or in the supply of money.
 * Cost-push Inflation: a type of inflation caused by substantial increases in the cost of important goods or services where no suitable alternative is available.
 * Buit-in Inflation: a type of inflation that results from past events and persists in the present.Time Value of Money
 * Inflation Calculator - http://www.westegg.com/inflation/
 * __Discounting to present value__
 * Present Value calculator: []
 * Formula to find the purchasing power in present dollar value:
 * Where:
 * PV is the value at time=0, the Present Value.
 * FV is the value at time=n, the Future Value.
 * i is the rate at which the amount will be discounted each period, the discount rate.
 * n is the number of time periods.


 * __Compounding to future value__
 * Future Value calculator: []
 * the addition of interest back to the principal
 * Formula to find the find out how much money the expected compound growth rate will become in the future.
 * Where:
 * PV is the value at time=0, the Present Value.
 * FV is the value at time=n, the Future Value.
 * i is the rate at which the amount will be compounded each period, the compound growth rate.
 * n is the number of time periods.
 * Examples of Inflation-
 * Gas prices raising and salary staying the same


 * The Effect of Inflation-
 * Prices of all individual items will increase.

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=**__The Time Value of Money__**=
 * the concept of the time value of money is that a set amount of money is worth more than the same amount in the future, due to it's earning potential.
 * "Time is money."
 * A dollar today is worth a dollar tomorrow.
 * A dollar you earn today, could be invested, so that you would have more than a dollar tomarrow.
 * 1) Future Value Basics
 * the future value of your investment at the end of the first year.
 * 1) Present Value Basics
 * what your investment gives you now if you were to spend today.

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Sources: [|http://www.investopedia.com/university/inflation/inflation1.asp#axzz1jLKRX6Kk] []