👉 Expiration math, often used in finance and economics, is a method to calculate the present value of future cash flows by discounting them at a given interest rate, considering the time until their receipt. It's based on the present value formula: PV = FV / (1 + r)^n, where PV is the present value, FV is the future value, r is the discount rate (interest rate), and n is the number of periods until the cash flow arrives. This formula essentially calculates how much money you need to invest today to receive a specific amount in the future, taking into account the time value of money. The higher the discount rate (r) or the longer the time period (n), the lower the present value, reflecting that money received later is worth less due to its potential earning capacity. This concept is crucial for investment analysis, budgeting, and financial planning.
