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Time value of money | Interest and debt | Finance & Capital Markets | Khan Academy

1060 ratings | 451257 views
Why when you get your money matters as much as how much money. Present and future value also discussed. Created by Sal Khan. Watch the next lesson: https://www.khanacademy.org/economics-finance-domain/core-finance/interest-tutorial/present-value/v/introduction-to-present-value?utm_source=YT&utm_medium=Desc&utm_campaign=financeandcapitalmarkets Missed the previous lesson? Watch here: https://www.khanacademy.org/economics-finance-domain/core-finance/interest-tutorial/cont-comp-int-and-e/v/continuously-compounding-interest-formula-e?utm_source=YT&utm_medium=Desc&utm_campaign=financeandcapitalmarkets Finance and capital markets on Khan Academy: If you gladly pay for a hamburger on Tuesday for a hamburger today, is it equivalent to paying for it today? A reasonable argument can be made that most everything in finance really boils down to "present value". So pay attention to this tutorial. About Khan Academy: Khan Academy offers practice exercises, instructional videos, and a personalized learning dashboard that empower learners to study at their own pace in and outside of the classroom. We tackle math, science, computer programming, history, art history, economics, and more. Our math missions guide learners from kindergarten to calculus using state-of-the-art, adaptive technology that identifies strengths and learning gaps. We've also partnered with institutions like NASA, The Museum of Modern Art, The California Academy of Sciences, and MIT to offer specialized content. For free. For everyone. Forever. #YouCanLearnAnything Subscribe to Khan Academy’s Finance and Capital Markets channel: https://www.youtube.com/channel/UCQ1Rt02HirUvBK2D2-ZO_2g?sub_confirmation=1 Subscribe to Khan Academy: https://www.youtube.com/subscription_center?add_user=khanacademy
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Text Comments (53)
Mike Bourg (6 months ago)
thank you! I've been reading about this all week and it finally clicked!
Bana Alchahwan (7 months ago)
thank you so much ...well explained video
Phinehas Ikanya (8 months ago)
All this is done on the assumption that all other factors are held constant.
Ryan Johnson (9 months ago)
How is finance not like placing a bet on the roulette wheel?
Ryan Johnson (9 months ago)
But be mindful of the deprecion of the currency... USD is a MF'er.
Kannaya Suman (11 months ago)
Thanx for solving it and making me to solve any type of problem
Yassine Dardour (11 months ago)
Sudharsan V J (1 year ago)
when I search for some topic in youtube and i find that there is a khan academy video on that ," I know I am saved" :)
Global Finance School (1 year ago)
What is Time Value of Money and more importantly, how does it affect your personal finance? The time value of money (TVM) is an important concept to investors because a dollar on hand today is worth more than a dollar promised in the future; the dollar on hand today can be used to invest and earn interest or capital gains. Read More Here: https://www.globalfinanceschool.com/blog-post/time-value-money
AgentSmith (1 year ago)
Bitconnect pay's you interest on your bitcoin up too 2% a day minimum investment is $100 worth of bitcoin. https://bitconnect.co/?ref=cannon0618
Pewdiepie 1 (1 year ago)
Beautiful, finally i understand
Sandra Thomas (1 year ago)
So how would you find the PV for FV of 15,451 with 9% interest for 13 years?
Mr Genius (2 months ago)
thats compund interest discounting formula
Mr Genius (2 months ago)
Just divide 15451 by (1+.09) to the power 13 and you get answer 5039.79
Carlos Moncada (1 year ago)
That is equal to $5039.79 today
Vijay Pal (2 years ago)
thanxs it helps me to know easily what actually it is
meow S (2 years ago)
thank u thanku thanku so much sir...😊😊😊 n pursuing now b.com 3rd year but i work part time and have no time for tution' hppy to watch ur sllybus and details provided you thank u so much, i was nervous how to clear my final year also but your video really satisfy me and i learn very very well i study in delhi b.com nd dont know how to solve my practical probelm but khan academy really appreciate you thank u so much i found my all b.com subject and have no need for tution i watch and save ur all videos thank u so much sir ☺
Nor Azah (2 years ago)
really helpful
Nor Azah (2 years ago)
Finance- Simplified (2 years ago)
Awesome video watch my video on time value of money too
kaif muhammad (2 years ago)
thank you so much but I have little bit problem in last of the lecture where you did the present value of $65 in one year, how is it calculating if we'll find for more than one year ?
Capricorn GoddessNika (2 years ago)
kaif muhammad You must already know the amount in the future you are solving for (the amount and the interest you expect to make. You must also know the interest rate. You divide that total by (1 + interest rate as a decimal) to reach how much you must lay out now to reach that future amount... It's not an "each year" calculation. It's one calculation done on, say , year 5, for example (where you already know the total cash layout and interest you expect to get in year 5) and you divide that total by (1+iterest rate as a decimal) to reach present value.
Mohammed Al-Bashiri (2 years ago)
Thank you for the amazing video. Love you khan academy
Teodor (3 years ago)
Why I dont have sound :(
Drew Levy-Neal (3 years ago)
Very concise and to the point. Provided exceptional clarity on a subject the text attempted to explain through nearly 70 rambling pages.
Abeer Alzoheiry (4 years ago)
Thank you
fleshcookie (4 years ago)
I love how thorough Sal is. He explains things so calmly, correctly and just really hits the fundamental concepts which you build upon. I could listen to him all day.
Fairy Da (4 years ago)
Well- explained video... Thank you very much... It helps a lot when I'm fed up of reading notes :D Do you have videos on how to answer financial questions? Thank you :)
Ramblequist (4 years ago)
Taxes and cost of carry for two years?  Banks are not free.
Jay Ganesh (4 years ago)
Thank you
Jay Ganesh (4 years ago)
Thank you
ed0985587 (5 years ago)
Take into consideration that money is taxed (interest rate paid by the bank). Factoring taxation and inflation, the money you make off interest (in small sums) is essentially irrelevant. So actually make money in this fashion, you'd have to save large sums. IMO, you're better off investing your money elsewhere...
The Genius (4 months ago)
ed0985587 That’s an opinion of anyone who understand money
jointheresistence123 (9 months ago)
That's not just your opinion, that's the opinion of anyone that knows how money works
Andrew Vecsey (6 years ago)
Money, past present and future. See YouTube video "12 Money, the game of life". Economics, banks and money explained for kids. See YouTube video "Money Simplified". How money markets work and their effects on countries. See YouTube video "Money Markets Simplified". How money speculators play havoc with people`s lives by gambling with their money. See YouTube video "Money speculators, Simplified".
mrhnm (7 years ago)
@kristopheraugust Indeed, I don't know that much about Austrian Economics. However capitalism is the only economic system which supports a free people. That's why I defend it.
mrhnm (7 years ago)
@kristopheraugust Ron Paul used the Austrian Business cycle to predict the housing crash 5 years before it happened. Moral is there is one real world example that proves that that guy is full of shit.
Pat Gunn (7 years ago)
@kristopheraugust You may predict that people won't waste time debating you, but that doesn't make your interpretation of that event correct.
Pat Gunn (7 years ago)
@kristopheraugust It's already failed to be accepted by the scholars on the topic. If you want to beat your head against the right brick wall, go find one of them who's willing to waste some time (akin to biologists who would waste their time debating one of the hordes of creationists rather than actually doing research). Academia has well-established ways of tossing out the kooks. If you want back in, don't expect fancy wordplay in debate to help. Scientists don't usually debate, they publish
mrhnm (7 years ago)
@pgunn01 Yep because the majority is always right.
Pat Gunn (7 years ago)
@mrhnm That's an extreme minority opinion. Austrian economics is based on a view of human nature that's incorrect (praxeology), and it has no predictive power and little impact in academia apart from what's been attained through donations of clueless libertarians. Sal would be wasting his time to teach it.
mrhnm (7 years ago)
Inflation is a symptom of the fiat monetary system.
mrhnm (7 years ago)
@pgunn01 Because it's the only system that isn't bullshit.
Pat Gunn (7 years ago)
@mrhnm Why? It's a discredited/fringe theory. You might as well have Sal waste his time teaching us Klingon.
mrhnm (7 years ago)
Let's see some vids on the Austrian System of economics! Pretty Please!
zalida100 (7 years ago)
@nicochunger The little hand "mouse" is easier to see when he is pointing to something. The other cursor is difficult to see. Either i have to improve my eyesight or you have to get over your irrational fear of pixels:)
Nicolas Unger (7 years ago)
change the mouse!!! i liked it more, when it were 4 lines.. that little hand makes me nervous.
Johnny Tran (7 years ago)
@cuppajoesugar Also, a wealthy man makes more money than his wife can spend.
ajoseph925 (7 years ago)
David Brew (7 years ago)
Time preference plays an important role in setting interest rates. If there was no interest, there would not be any (financial) incentive to forgo current consumption for later satisfaction. Immediate satisfaction is more preferable than delayed but Fiat money can distort the true state of economic conditions.
O Y (7 years ago)
just do it like this: 65 x 100 / 110 = 59,09 :D
Woman = Time x Money Time = Money Woman = (Money)2 Money = (Problems)(1/2) Woman = Problems
theepicsealshow123 (2 months ago)
7 years ago and not a single like or comment rip XD until now

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