What is the relationship between present value and future value?

Q: relationship between Future Value Factor and Future Value of an Annuity Factor

A: Future value factor is the equivalent value at the some future date of a cash flow at time 0. For…

Q: What is market value ratio?

A: Ratio is the relation between two different quantities obtained after dividing one by another.

Q: Differentiate between price risk and reinvestment risk.

A: Price risk is the risk of decline of the price of the investment or an asset after the underlying…

Q: Define the term internal rate of return?

A: The internal rate of return (IRR) is a capital budgeting metric used to gauge the benefit of…

Q: what about in terms of present value?

A: Present value helps us know the value of future cash flows in the present time. A higher interest…

Q: what is the effect of making changes to net present value calculations

A: Net Present Value = Present value of future cashflows - Initial Investment

Q: What is the meaning of economic value added (EVA)? What does it measure? Why is it important?

A: Economic value added ("EVA") measures a company's financial performance based on the excess wealth…

Q: What is the horizon value? Why is it also called the terminal valueor continuing value?

A: Horizon value is the value of the expected dividend that will be received after the horizon date.

Q: a present obligation?

A: Given: To explain the economic resource and the present obligation as,

Q: Write the methods of Calculating Interest?

A: Methods of calculating interest: The basic and fundamental methods for calculating interests are…

Q: Define the term current market value.

A: The current market value (CMV) gives parties interested in making a transaction the approximate…

Q: What is the concept of present value? What is discounting?

A: Present value means value of future cash flows in todays terms.

Q: What is current market value? Describe about it.

A: Market value: Market value is the price at which, both seller and buyer agree to exchange the…

Q: What is future value, FV?

A: Future Value: The future value is the value of the present amount compounded at an interest rate…

Q: What is risks and interest rate

A: Risks and interest rate are tied together in case of fixed income instruments like bonds.

Q: What is the concept of present value? How does it affect inflation

A: Increase in general price levels in an economy is known as inflation. Due to inflation, the cost of…

Q: What is payout period and how is it calculated?

A: Companies employ various methods in the process of selection of the most financially appropriate…

Q: What effect do interest rates have on the calculation of future and present value? How does the…

A: The time value of money is a concept that is based on the idea that a given amount of money is worth…

Q: What are the different terms used to refer to the rate of return?

A: Rate of return is an expected profit on an investment by a investor. It is a rate at which investor…

Q: 8. How should internal rate of return be calculated in terms of Net Present Value?

A: For a given project, there is a cost incurred at the beginning. It is called the Initial cost of the…

Q: Define the term Equivalent worth-calculation?

A: To define the term Equivalence worth calculation.

Q: Where does the discount rate from present value came from? How to solve it?

A: In finance, a reduction rate is that the rate of come wont to discount future money flows back to…

Q: What is the process of consideration of the payback period?

A: Payback period It computes the required time to recover back the project’s investment by way of…

Q: What is present value interest factor?

A: The present value interest factor is a mathematical equation used to estimate today's value of money…

Q: Describe the method of developing a Present Worth Distribution?

A: Present value or Present Worth of an investment or a project is the value of future cash flow…

Q: What is the internal rate of return? How is it used? How does it relate to the concept of compound…

A: The internal rate of return (IRR) is a capital budgeting metric used to gauge the benefit of…

Q: Define the term Rate of Return?

A: Rate of Return:It means the benefit that is derived from the investment, benefit may be in terms of…

Q: What is future Value of present sum

A: Future value is the value of what a certain asset/cash/instrument will be worth at a future…

Q: What is the clearing price for the following Treasury Auction, in which the US Treasury wants to…

A: Treasury bills, or T-bills, are short-term debt instruments issued by governments, with the U.S.…

Q: How Net present value, interest rate, and benefit change if cost increases.

A: Net present value means difference between present value of the cash inflows and present value of…

Risk and return

Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary. 

Capital Asset Pricing Model

Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.