An Overview of Mathematics of Finance With Reference to ‘Time Value of Money’

Abstract

Money is not everything in life but money is the most important need of everyone’s life. This paper describes the value of money which changed over a period of time. It also explain the important factor i.e. interest, due to which the value of money changes. This paper also discussed the significance of simple interest and compounding interest and will compare the growth rate between these two. Also how cash flows affects the business and helps in taking business decision. We will discuss about compounding cash flows and discounting cash flows. Used to calculate the present value and future value of a given cash flows. This paper will not discuss various theories on interest.

Keywords: Time value of money, financial management, simple interest, compound interest, compounding, discounting, cash-flows

JEL Classification: GOO, G31, G32, G39, G20, G29, G22, G10, G19, G12