Time Value of Money Explained

The time value of money lets you compare money across time. Would you rather have $100 today or $110 a year from now? By converting a future value to a present value or a present value to a future value, you can compare money across time.

Future value formula: FV = PV * (1+r)^n
Present value formula: PV = FV / (1+r)^n
r = rate of return
n = time (number of periods)