Different debt instruments have very different streams of payment with very different timing. Thus we first need to understand how we can compare the value of one kind of debt instrument with another before we see how interest rates are measured. To do this, we make use of the concept of present value.
Present Value The concept of present value (or present discounted value) is based on the common-
sense notion that a dollar paid to you one year from now is less valuable to you than a dollar paid to you today: This notion is true because you can deposit a dollar in a
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At least once in every person’s life comes a time when the need is great and the resources are few. It can be hard enough to make ends meet on a decent wage, but, when the times get tough and the money just is not there to meet the need, a person can easily despair.