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What is the 'time value of money'? - MoneyWeek Investment Tutorials

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Text Comments (33)
Eesa Taqee (2 years ago)
Very good explanation. Good on you.
modupe olukanni (2 years ago)
If the first 10 million is being reduced or devalued by 5% why is the answer not 9,500,000 ? Why is it 9.52m???
Azar Aftimos (2 years ago)
Nice explanation. Thanks.
Divyesh Dave (2 years ago)
Not helped .. So typical make it easy... Much easier ways available on YouTube ..
moon cheks (3 years ago)
keep it up it was helpful =)
Tim Kastle (4 years ago)
This is a great video for learning or refreshing your knowledge. Thank you
Alex Vech (4 years ago)
try to keep your videos shorter
scrapy3211 (4 years ago)
hello im a student here trying to understand this, so are we assuming that after we receive the first payment of 10M we are going to invest it in a bank that also pays 5%, so therefore the lost opportunity of waiting one year for the first payment is represented as discounting that first payment by one years worth of interest?
aminozuur (4 years ago)
You are the best. Keep it up.
MzzVibe (4 years ago)
Brilliant Teacher thank you
jatin puri (4 years ago)
well thank you sir :)
ronyap28 (4 years ago)
@ 11:30, you say that if you put the money in the bank right now at 5% you should get 50m at the end. 43.29 x (1.1)^5 is nearly 70 million. Isn't it better to put in the bank?
Fozi08 (4 years ago)
Isnt the formula , PV = FV/1+K^n ?? so it would be 10m / 1.05^5 and it would get you $7,835,261 ?? isnt that amount is the present value of the invesment ?
Max Mustermann (5 years ago)
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Bo Manry (5 years ago)
Great presentation!
harshaku75 (5 years ago)
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zelesluk1 (5 years ago)
Due to your comment, no need to see the entire video cause I already understand what is time value of money
Andrew Spiers (5 years ago)
all these videos are brilliant
NatureWatcher (5 years ago)
Hihi, when I told my classmates that I was going to try to earn a living online, they laughed at me. But afterward I showed them my profits. Go Google Smarter Money Maker to see what I showed them.
Nasrigunner8 (6 years ago)
I think you made a mistake at 11:33. You said ''in other words if you put 43.29mn in a bank right now at 5%, in 5 years it should compound up to 50mn after allowing for five years. but if you do the math 43.29(1.05)^5 =55.25 mn. The mistake was that the 50mn as in the example, will be received not at the end of the fifth year but at the end of each year in 10mn blocks. Please correct me if I am wrong. Best Regards
CJoQ (6 years ago)
Haha! 'For anyone out there who is still awake' You certainly have a unique style, Tim. Very informative, very funny, yet serious.
g13iceman (6 years ago)
Doesn't the general fear of inflation also depress the value of future money over present money, and therefore is another factor in the time value of money along with the bank's interest rate, which the interest rate could be used to account for I suppose. This is assuming that there is inflation and not deflation or zero inflation.
CovertOpsProductions (6 years ago)
why does the power of the number of interest increase over time?
MoneyWeek (6 years ago)
No worries. Glad you asked actually as i am sure plenty of other people would make the same mistake but choose to suffer in silence!
MoneyWeek (6 years ago)
I agree!
Jeffrey Alvin (6 years ago)
due to time value of money i won't pay bills until the due date
Jimmy De'Souza (6 years ago)
Thanks, was confusing me. I am no mathematician after all :D
Jimmy De'Souza (6 years ago)
Ah thanks for explaining it.
heckler73 (6 years ago)
1.05^-1 =/= 0.95 That is the same error most people make when they are trying to juggle exchange rates in their heads, too.
Andrew J (6 years ago)
Fred is a Venture Capitalist. Is his company called Holy Shirts and Pants?
md polash ahmed (6 years ago)
Fantastic.
MoneyWeek (6 years ago)
passwordresetisbroke - sorry to disagree! If I give you 9.5m now and you invest it at 5% you'll have 9.975m not 10m. The maths of discounting (assuming you receive each cash flow discreetly at the end of each period and the interest rate remains constant) at 5% requires that you divide 10m by 1+r for period one, or 1.05. A quick check - 10m/1.05 is roughly 9.52m. In reverse 9.52 x 1.05 is 10m (allowing for my rounding to two decimal places). Tim.
Jimmy De'Souza (6 years ago)
Dont mean to be a prude, but I think you got the maths wrong. Is it not; 10,000,000 x 95% = 9,500,000 10,000,000 x (95%2) = 9,025,000 10,000,000 x (95%3) = 8,573,750 10,000,000 x (95%4) = 8,145,062.5 10,000,000 x (95%5) = 7,737,809.375

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