Assumptions behind the TVM calculations

    Q.1 What are some of the assumptions behind the TVM calculations? How do these assumptions limit our application of these calculations? Q.2 write a reply for this article Some of the basic assumptions behind the TVM is that, a dollar today is worth more than a dollar in the future. TVM presume five variables namely, present value PV, Future value FV, number of period, interest rate and payments. The assumptions behind the TVM follow that, -Money is always productive and repeatedly invested - Short term interest rate are similar to line to long term interest rate, implying that the yield curve is flat -Payment made are always equal can be classified all inflows or outflows -The interest rate is stable throughout the time period Limitation of the application of TVM -We cannot always predict the future and be accurate about our forecasts in cashflows -Many external factors can play spoilsport be it economic and political factors