Glossary
Time value of money
M3.01Also called TVM, time value.
A rupee today is worth more than a rupee next year, because today's rupee can be put to work. Every valuation technique is an application of this one sentence.
₹1,00,000 invested at 8% becomes ₹1,46,933 after five years. Run the same arithmetic backwards and ₹1,46,933 five years away is worth ₹1,00,000 now.
The rate is doing all the work, and choosing it is the hardest judgement in finance. It has to compensate for waiting, for inflation, and for the chance the money never arrives at all.
Everything else is arithmetic.
One rupee now beats one rupee later.