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

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Why when you get your money matters as much as how much money. Present and future value also discussed. Created by Sal Khan.
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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.
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[@sudharsanvj8531]

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" :)

[@AtefSalama]

me too :)

[@gavinc.6357]

Congratulations. You explained something in 8 minutes and 16 seconds what neither of two college instructors could explain in an hour+ lecture. Thank you for this video!

[@fleshcookie]

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.

[@drewnealski969]

Very concise and to the point. Provided exceptional clarity on a subject the text attempted to explain through nearly 70 rambling pages.

[@thebourg]

thank you! I've been reading about this all week and it finally clicked!

[@VV-zb7pm]

I love your videos! And how you repeat things while writing them on the board:) thank you so much!

[@LyfInGeneral]

Thank you Khan , your lectures help me a lots in financial management classes.Thank you God bless u and never give up on us.

[@MrAlbashiri]

Thank you for the amazing video. Love you khan academy

[@nanditaroy1347]

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 ☺

[@perryalzoheiry7325]

Thank you

[@MrSumansai]

Thanx for solving it and making me to solve any type of problem

[@sabrinasykes5480]

Why can't my lecturers teach like this???!!! you make it so simple to understand. Thank you!!!!

[@everydaycelt]

Thanks for this. One note, probably more accurate while equally easy to use 1% instead of 10.

[@Vjart4u]

thanxs it helps me to know easily what actually it is

[@banaalchahwan8419]

Thank you so much perfect explanation

[@TheLifeTrekker]

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.

[@scorpion4351]

Beautiful, finally i understand

[@banaalchahwan8419]

thank you so much ...well explained video

[@PK-je6rk]

This is awesome. Well explained, thanks.

[@DoPeMaN60]

well explained video thanks allot!!

[@MelissaRogers-rp1uo]

Thank you. I appreciate your videos.

[@fairyda8690]

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 :)

[@chrissystewart6268]

Great lessons ready to learn time value money 2023. This is my goal

[@gerardomata.costarica]

this helped thanks khan!

[@rachelsmith7946]

Thank you!

[@mrhnm]

Let's see some vids on the Austrian System of economics! Pretty Please!

[@rizalukman7982]

Well this is well explained

[@ariah5093]

God bless you. I have the absolute WORST textbook rightnow for my finance class lol so thank you

[@norazah4350]

thankyou

[@chauhoang814]

Just what I need

[@remij9592]

Thank you so much

[@henrycollins4837]

What about inflation, bank charges, tax?

[@JAdrew]

3:00 was 110 divided by 10 because the interest is 10%? Or will it always be like it

[@ed0985587]

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...

[@jointheresistence123]

That's not just your opinion, that's the opinion of anyone that knows how money works

[@sumeyasadik4821]

u are amazing

[@chrissystewart6268]

I need to know this stuff very important

[@zalida100]

@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:)

[@kshitijrajpoot736]

Is this kind of like compounding? 2:08

[@kngfelixx]

You can apply this for a business? I own a company and charge $35 a month for customers to come and play video games at my suite but am thinking of offering a discount to customers if pay a 6 month subscription. If they pay $150 for a subscription, that's about a $10 discount each month ($60 total). Would it be wise of me in doing this? I currently have about 150 people signed up for my subscription service paying $35 a month. I am trying to understand if this is in the best interest to offer something like this...

[@danielmaluenda9731]

I think time is invaluable, meaning nothing can value as much as time in its infinite scope (just a cultural opinion of mine) in any given week you could make a ridiculous life changing sale, or find inspiration to the next big brilliant business idea that pulls through. Anything could build up to, through time. But I guess a big point of money is to, overtime, as a society, value things as we see them (supply and demand). I bet this too is why then interest rates are so studied by the Fed, because whatever interests over time in an economy, defines spontaneously what our society values the future as (and money flow over time) - monetarily. Without that in mind, I bet that’s what happened to banks and individuals in the 1920s, too much trust in our system without thinking of how an economy can flow over time, thinking the now rather with eternalperspective, so there was a huge spill that broke our system (our trust) These are just thoughts I had running in my head while watching the video

[@kaifmuhammad5765]

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 ?

[@MiamiAKAtude08]

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.

[@alliehan2175]

@@MiamiAKAtude08 this explanation was on point. I read this and the 'light bulb' went off.

[@NoWordsButLyrics]

To get Present Value= Future Value÷(1+rate)^no. of years. e.g. PV= 121÷ (1.1)^2=$100 $21 is the interest Note: solve first the exponent then divide from FV. To get Future Value= Present Value x (1+rate)^no. of years e.g. FV= 100 x (1.1)^2 = $121 $21 is the interest note: solve first the exponent then multiply from PV to get FV.

[@mrhnm]

@pgunn01 Yep because the majority is always right.

[@youngentrepreneur000]

Why I dont have sound :(

[@norazah4350]

really helpful

[@ajoseph925]

eyyy

[@sandrathomas2145]

So how would you find the PV for FV of 15,451 with 9% interest for 13 years?

[@ZeusApollo_97]

That is equal to $5039.79 today

[@mrgenius1830]

Just divide 15451 by (1+.09) to the power 13 and you get answer 5039.79

[@mrgenius1830]

thats compund interest discounting formula

[@theworldthroughmyeyes024]

here in 2021

[@mnejc]

Future value = Present value x (1 + rate)^number of years

[@kimgautreau7534]

I’ve already donated and I don’t have access

[@ignaciosarrado2214]

where does the 109 come from?? 10%?/

[@heather3037]

Ignacio sarrado that’s part of the example and no maths was done to get to there, it’s just showing you that interest rates can get you $110, so it’s better to choose them over an offer from someone of $109 over that period.

[@sarahhan5578]

am are you johnsdotgame? beacause you sound like him

[@westmichiganfarmgirl]

cant see anything. needs bigger letters numbers. cant learn when you can't see

[@NicolasUnger]

change the mouse!!! i liked it more, when it were 4 lines.. that little hand makes me nervous.

[@mrhnm]

@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.

[@nikoli6612]

🇸🇮

[@phinehasikanya4353]

All this is done on the assumption that all other factors are held constant.

[@RyanJohnson]

How is finance not like placing a bet on the roulette wheel?

[@medalsixdhar4445]

Medalsix Dhar Roll No:148(morning)

[@oak415]

@cuppajoesugar Also, a wealthy man makes more money than his wife can spend.

[@globalfinanceschool654]

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: www.globalfinanceschool.com/blog-post/time-value-money

[@ossie_14]

just do it like this: 65 x 100 / 110 = 59,09 :D

[@markrodriguez3306]

You can start a business at any given time but you can't grow nor get to a standard level without investing.

[@PatGunn]

@kristopheraugust You may predict that people won't waste time debating you, but that doesn't make your interpretation of that event correct.

[@PatGunn]

@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

[@lostheroes8704]

What if we find the present value of $65 through this way: First find 10% of $65 and then subtract that amount from $65. 10% of $65 : 10 x 65 /100 = 6.5 65 - 6.5 = 58.5 What is wrong with my way of solution?

[@CanIPutMyBallzInYoJaws]

Yes you are correct, but sometimes, this solution might not always work.

[@PatGunn]

@mrhnm Why? It's a discredited/fringe theory. You might as well have Sal waste his time teaching us Klingon.

[@Ramblequist]

Taxes and cost of carry for two years? Banks are not free.

[@mrhnm]

@pgunn01 Because it's the only system that isn't bullshit.

[@shrutithegreat]

Warren Buffet 😂😂😂

[@PatGunn]

@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.

[@jayganesh2757]

Thank you

[@jayganesh2757]

Thank you

[@Abdelgawad909]

Thank you