Some Topics That Didn’t Make It into the 1972 Edition

by Martin L. Leibowitz

The concept of present value (PV) is basically a simple one that plays a key role in virtually every area of finance. Yet some surprising points of confusion and gaps in understanding remain, even among experienced financial analysts. In Inside the Yield Book, we addressed some of these issues within the bond domain. The original appendix represented a deliberate attempt to move beyond the simple mathematics of present value and provide a more comprehensive feeling for the underlying motivations and assumptions. In particular, we tried to relate PV to the more intuitive concept of a basic compounding process that generates future value (FV) over time. The following discussion ...

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