The present value of an item is one way to determine the absolute worth of the item and to compare its worth to that of other items. Another way to judge the value of an item which an investor may own or consider purchasing is known as the rate of return. If a person invests an amount P now and receives an amount A one time unit from now, the rate of return can be thought of as the interest rate per time unit that the invested amount would have to earn so that the present value of the payoff amount is equal to the invested amount. Since the rate of return is going to be thought of as as equivalent interest rate, it will be denoted by the symbol r. Then by definition