A dollar received or paid at one point in time is not worth the
same as a dollar received or paid at another point in time. This
concept is called the time value of money. It is based on the
simple idea that through the power of interest, money at one
point in time grows to more money at another point in time. Just
as a bank pays interest on CDs and savings accounts, any amount
of money at a particular date is worth less than the same amount
of money at a later date because the money at the earlier date
would earn interest and be worth more at the later date. The
accumulation of interest over time is called compounding or
compound interest. Money at one point in time is converted to
its value at a later point in time by a term called the compound
interest factor. The opposite of compounding is discounting,
which is a far more important concept in finance. From the above
statements about compounding, money at a future date is worth
less today. This future sum of money is converted to its current
value, called