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Net present value (NPV) is a way of measuring the value of an asset that has cashflow by adding up the present value of all the future cash flows. NPV is used to evaluate and compare capital projects or financial products with cash flows spread over time, and it depends on the time value of money and the discount rate.
Learn how the forward exchange rate is determined by the spot exchange rate and interest rate differences, and how it is used for hedging and forecasting purposes. Find out the empirical evidence for the unbiasedness hypothesis and the foreign exchange risk premium.
Purchasing power parity (PPP) is a measure of the price of specific goods in different countries and is used to compare the absolute purchasing power of the countries' currencies. PPP is based on the law of one price, which says that, if there are no transaction costs nor trade barriers for a particular good, then the price for that good should be the same at every location.
Learn the concept of time value of money, which is the idea that receiving money now is better than later. Find out how to calculate present and future values, annuities, and interest rates using formulas and examples.
This web page lists the exchange rate arrangements of countries and territories as classified by the International Monetary Fund. It also shows the monetary policy frameworks and exchange rate anchors of each country or territory.
An interest rate is the amount of interest due per period, as a proportion of the amount lent, deposited, or borrowed. Learn how interest rates vary according to different factors, such as government policies, currency, term, risk, and supply and demand, and how they affect the economy and financial markets.
Learn what an exchange rate is and how it is determined by different factors, such as supply and demand, government policies, and market conditions. Compare and contrast various exchange rate regimes, such as floating, fixed, and hybrid, and their implications for currency values and trading.
The discount rate which is used in financial calculations is usually chosen to be equal to the cost of capital.The cost of capital, in a financial market equilibrium, will be the same as the market rate of return on the financial asset mixture the firm uses to finance capital investment.